Refinancing real estate is a big business. You may have heard the term “conforming” and wondered what a loan would conform to? The answer is that loans that have certain characteristics and are of a certain type of considered confirming and can be sold into the stock and bond market. As a typical mortgage holder, this buying and trading is almost invisible to you and with the exception of possibly a letter saying your loan was sold, everything about the loan stays the same.

Refinancing a home mortgage is much easier than applying for a completely new one. There are two major type of refinancing options. Those where you are simply refinancing to gain a lower interest rate and new loans where you are looking to take out some of your equity in cash.

The first option, that of lowering your interest rate may at first seem like a good deal. Remember however that during the first few years of a loan, the huge majority of the payments all go to interest. By doing a refi, you are able to lower your payment and get a lower interest rate but you also start all over on that 30 year mortgage. So you pay a little less money per month but pay it for a longer period of time. Be certain to check and see if even with the lower interest rate which way actually costs you more in the long term.

Another thing to consider is the cost of the loan. If you’re NOT a long term type or homeowner and plan to move within the next 3-5 years, does refinancing a home mortgage make sense when all the costs and fees are considered?

Taking out equity from your home is another popular reason to consider refinancing a home mortgage. In this scenario, a homeowner isn’t as concerned about lowering their monthly payments but wants cash for a variety of reasons. Once again however, a new mortgage may not be the best solution. Consider a 2nd mortgage. Seconds are typically for 15 years and they have the benefit of preserving your great interest rate on your primary mortgage. There are several types of loans that are essentially a second mortgage on your home.

Anyone considering a home mortgage refinance should look at all the options before making the decision. Know and understand your situation and if you plan on being in the home long term. (>5years). Check out the available options and make the right decision for your situation. Refinancing a home mortgage can make a lot of sense given the right circumstances.

By: Abbie Frank

Homeowners should always be 100% aware of all closing costs and fees prior to closing any contract. A lot of times, homeowners actually end up losing money due to these costs if they are not cautious. Comparing different mortgage lenders may find your the lowest interest rates, but you need to take into consideration the costs of lenders, and different home loan options which may be more appropriate.

How long until closing costs and fees are recovered?

Typically, homeowners should be able to overcome the expenses associated with refinancing within 24 months of signing the deal. However, this is not rule, just a typical guideline. Each situation is different and sometimes being not being able to recover the closing costs within 2 years is acceptable.

Make sure to take some time and do the actual math involved. Once your done, check it again to make sure it is accurate. Compare your costs with the new mortgage, and its terms and conditions, to figure out how long until you are able to overcome these fees and truly start saving.

Different Mortgage Lenders, Different Costs

A lot of homeowners are truly surprised to find that closing costs can vary so much from lender to lender. Generally, a mortgage refinance costs a few thousand dollars, but thing like points, and private insurance can increase those costs. The best thing to compare between different loan choices is the APR (Annual Percentage Rate) which is a better picture of the actual loan cost.

Using the internet to research potential mortgage lenders can easily save a homeowners thousands of dollars. Homeowners can easily get quotes back from multiple lenders, all from the comfort of their own home, and ensure the best deal possible.

Mortgage refinancing costs are greatly different between different lenders. Homeowners can easily avoid paying too much when refinancing a mortgage by following this simple advice. The only sure way to make sure your not paying too much is to research other lenders, ask about costs, and compare different loan types.

By: Michael Petrone

You’ve recently bought a home and you are already wondering about refinancing. First, you want to know when you can do it, which is simple: you can do it the day after you sign the papers. However, that may not be a wise decision. Here are some things to consider before looking into refinancing:

1. Do You Have a Prepayment Penalty (PPP)?

Because lenders take a risk when lending you money, they expect a certain amount of financial return. To ensure this return, lenders can institute a prepayment penalty (PPP) on your loan that can cost you thousands of dollars if you pay the mortgage off in full during a certain time frame, usually two or three years. Refinancing during your PPP term can cost you as much as 5% of your initial loan amount.

2. Do You Have Enough Equity?

For recent homeowners, it is unlikely that you have much equity, especially if you did not put much down. Of course, if you made a considerable down payment or got a great deal you could access that equity immediately; however, it may be costly to pay closing costs on another loan so soon.

3. Is the Cost Worth It?

Even if you have equity to refinance, you still have to ask yourself if the costs are worth it. If you are trying to save money, you have to project a break even point, i.e. the point when your savings covers the closing costs of the refinance. If that break even point is more than two years in the future, it is probably not worth refinancing.

You certainly have the ability to refinance when you wish, but you should consider the aforementioned cautions before leaping to a financial decision that may do you more harm than good.

By: C.L. Haehl