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MORTGAGE REFINANCING 101
MORTGAGE REFINANCING 101



by Sierra A. Martin

6/22/2006



Thinking about refinancing? You’re not alone. In an effort to balance our family’s budgets and curb our healthy spending habits, many people look to mortgage refinancing as means of restructuring their volatile status, as bills continue to spill out of the mailbox.



For many mortgage refinancing may feel like the equivalent of banging one's head against the wall. Whether you are looking to consolidate your loans, get your hands on some cash, or simply take advantage of lower interest rates, one fact remained consistent -- the result should always have the long term benefit of larger savings over the term of the loan.



Let’s begin with a few simple mortgage refinancing facts to help make the most of your mortgage refinancing experience. A rule of thumb when considering mortgage refinancing is to plan to remain in the home for a minimum of three years post mortgage refinancing in order to maximize the dollar value. The refinancing your existing montage will generally be between 3 – 6 percent on your outstanding balance. However, let’s start by pulling out those existing mortgage documents and dusting them off for a better look. We will be looking for any clauses that call for prepayment penalties that would potentially drive up your mortgage refinancing costs.



As a real estate broker, I always recommend to my clients to compare between 3 – 4 mortgage companies before deciding who is best suited to meet your mortgage refinancing needs. Take time for your due diligence beginning careful not to overlook interest rates, closing costs, fees, and the terms of the loan before making out any loan applications for mortgage refinancing. You should also reacquaint yourself with a few lending terms so you fully understand the type of mortgage refinancing you will be receiving -- whether adjustable or fixed rate. A site that compares interest rates nationwide is www.CompareIntrestRates.com.



Once the decision has been made to precede with the loan application for mortgage refinancing, I always suggest pulling a credit report on yourself. Please remember that you will want to pull only one since every time someone looks into your history, your credit score is actually lowered. When you do apply for a mortgage refinancing loan, make sure you take along a copy of this credit history. This will give you the opportunity to clear up any discrepancies as this will be the same document lenders will also be looking at when sizing up your repayment history. The errors and surprises found here are rarely good, so save yourself the trouble and a percent or two by clearing up any discrepancies or outstanding debts 30 – 60 days prior to your loan application for mortgage refinancing. This will allow the reporting at the big three credit agencies -- Trans Union, Equifax, an Esperian to post the corrected history to your report.



Keep in mind when choosing a lender that professionalism and service are extremely important attributes of any lending company. Establishing a relationship with your consultant will help you keep up with the processing of the mortgage refinancing loan application and watching the interest rate prior to locking in your mortgage refinancing rate. You should make sure you sign the appropriate document indicating mortgage refinancing interest rate amount and the discount points. This guarantee is usually for a period of 60 days so you must plan carefully with your loan officer in order for the mortgage refinancing loan to be available close on during this time frame. Many mortgage companies will allow the mortgage refinancing rate to decrease should lower rate become available but it prevents the rate from an unexpected increase. Should you find a company unwilling to put in writing its guarantee of rate I strongly suggest you look for another lender and pronto!



With a plethora of mortgage companies out there willing to waive charges ranging for application fees, appraisals, and legal fees you can easily save somewhere between $1,400 - $3,000. In exchange for these paid fees you can expect to accept a slightly elevated rate than the current lowest rate available.



There is yet another possibility for way laying the out of pocket expenses related to your mortage refinancing. Those involve including your points and closing costs into the actual mortgage. You can also choose the option of paying discount points (1 discount point is the equivalent of 1% of the loan amount) and the closing costs to take advantage of the lowest possible rate.



Take a deep breathe and don’t be in a hurry. Rarely is anything done quickly when it comes to mortgages or refinancing mortgages. The average mortgage refinancing takes anywhere from 3 – 6 weeks and, like anything worth having, requires time to shop around for the best buy. Begin today planning for your future and remember in this industry of mortgage refinancing they need you more than you need them. You already have a mortgage. If they want your business, it needs to be beneficial.