Chat Forums

How do I refinance a home mortgage? Tell me exactly what steps I need to refinance my home loan? That's some good questions!! let's go through what you need to do to get your home mortgage refinanced.

An adjustable rate mortgage is a great way to get into a home with low monthly payments. But the periodic rate adjustments and possibility of rate hikes can be disconcerting. Which is why you might want to consider switching to the security of a fixed rate loan. By refinancing your home loan from an adjustable rate mortgage to a fixed rate, you could save a small fortune in interest over the lifetime of the loan. Generally, it's a good idea to get the lowest fixed rate possible, but you also have to consider your situation. If you're in the first year of an adjustable rate mortgage (ARM) and you plan on moving in three years, it probably doesn't make sense for you to refinance. However, if the rate on your ARM is about to adjust and you think the rate will go up, then it may make sense to get a long-term fixed-rate mortgage, especially if you don't plan on moving in the next seven years or so.

There are typically fees associated with a home mortgage refinance. To figure out if those fees make it worth it to refinance your mortgage, calculate how long it will take you to break even. For instance, if it costs you $800 in fees, and refinancing lowers your monthly mortgage payment by $50, it will take you 16 months to recover the cost of refinancing. If you’re not going to stay in the home that long, it may not make sense to refinance.

Paying points may or may not be your best option, depending on what you're doing. Points paid on a loan you've refinanced can be deducted from your taxes only in small increments-1/30th a year for a 30-year mortgage, for example. This means it could be several years before your lower rate makes up for the points you pay. However, if you're buying a home, points paid are a tax-deductible expense for that year. Please consult your tax advisor.

A general guideline is that you'll need two percent of the home's purchase price for prepaid interest to cover the time between the date you close your loan and the date you make your first mortgage payment. Some states may also require pre-payment of property taxes . When refinancing however, your old mortgage will most likely have money in an escrow account that can cover these costs. Some borrowers get short-term loans while their escrow transfers back to them, but most pay the money at the closing knowing they'll get it back when their escrow is returned.

What it really boils down to when you are refininacing your mortgage is figuring out what the costs are, whether it makes since to refinance after considering these costs, and then applying with your refinance lender.

Good luck!

__________________
Cajun boy!