What to know about refinancing

Posted: May 23, 2013 in Mortgage Information

The housing market is soaring in part because mortgage rates have never been this low. However, rates have been slowly climbing back up with the improvement of the economy and better-than-expected jobless claims. Refinancing and lowering your rate can be a great way to increase cash flow if you are planning on holding onto the property as a long-term investment rental.

Here are a few basic do’s and don’ts for refinancing your home loan:

• Work with the right lender. Find a bank that can close quickly and won’t force you through months of delays. Ask the bank for its closing times during the last three months. If it can’t deliver in the time frame you need, then keep looking.

• Make sure you get a fair estimate of closing costs up-front. Knowing how much you have to pay to refinance is critical. Sometimes what you save in interest just won’t compare to how much you have to pay the bank.

• Customize your loan. When you work with a loan officer, that person will present you with an array of options. You can change the term of the loan, buy down the rate or do any number of other things to customize it. While it will be tempting to knock down the interest rate as low as possible, it’s not always your best option. If you spend $5,000 to buy down the rate and it saves you $200 per month, then it will be 25 months before you break even. Do the math to see if it’s right for you, and be realistic about how long you plan to stay in the home.


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