There’s been a lot of talk about refinancing your home mortgage in the news lately. Part of its popularity is due to the fact that many home buyers are rushing to take advantage of record low loan rates. However, many homeowners are faced with a lot of information at once, which raises more questions rather than answering them. To help homeowners make the right refinancing decisions, we’ve answered a few of the top questions about the mortgage refinance process.
Q. Is it a good idea to refinance my home?
Sometimes, it makes sense to refinance but it depends on your individual situation and what your long-term financial goals are. You may be tired of paying more than one mortgage on the same home. You may adjust your fixed rate mortgage to an adjustable rate or vice versa, or you may want to lower your interest rate and/or monthly payment. To determine if taking the step of refinancing your home is right for you, it’s important to consider the following:
• How long do you expect to be in your home?
• How much equity do you have in your home?
• Are you willing to pay points to get a lower rate?
• Can you benefit from a lower mortgage payment and extremely easy refinancing with an FHA loan? Find out if you qualify for an FHA Streamline refinance by answering a few simple questions.
• Will having lower payments more than make up for the closing costs, fees and points if any?
Q. Is it costly to refinance?
Absolutely not. With the wide variety of loan programs available at Quicken Loans, you may be able to refinance your existing home loan at low to no cost to you. Be advised however, that there are few loans that truly have no closing costs. Sometimes lenders may not charge application fees and agree to pay the appraisal and title fees, but they may increase the interest rate in return. Lenders can also roll the costs into the amount of your loan. So, because you’re not paying costs up front, it’s called a “no closing cost” loan. While slightly increasing your mortgage might be acceptable to you, keep in mind that it’s not really a cost-free loan.
Q. How long does it take to refinance?
With Quicken Loans, refinancing normally takes between two and four weeks, depending on a few things:
• Do you have a recent home appraisal?
• Are you in an area that appraisers can get to easily?
• Are there plenty of other comparable homes in your neighborhood?
Usually, getting the home appraisal is what slows the process down the most. During refinancing booms, appraisers can be difficult to schedule. Also, having your paperwork ready helps to speed the process along much faster
Q. What is the difference between the rate and the APR?
The annual percentage rate adjusts the mortgage interest rate to reflect estimated closing costs including points paid at closing and mortgage insurance.
Our Home Loan Experts adhere to the guidelines set by the Truth in Lending Act which requires us to provide the APR when advertising a mortgage loan and will always provide the loan’s APR upon request.
Q. Will refinancing remove my PMI?
You may be able to remove mortgage insurance by refinancing your home loan. In order to qualify you must have made your mortgage payments on time every month for a year and you have at least 20% equity in your home either through appreciation or paying down your mortgage. Our Home Equity Calculator can help determine the available equity in your home.
Q. Does my new rate have to be at least 2 points lower?
It’s a common misconception that you have to wait to refinance until mortgage rates drop by 2%. The decision to refinance is determined by how long you plan to live in your home, how much lower the interest rate will be on the new loan, the closing costs, and so on. Typically, when home buyers make the decision to refinance, it’s to take advantage of lower interest rates to lower your monthly mortgage payment. The points you paid at closing on your current loan aren’t relevant to a refinance. Instead, you should consider what you’re going to save going forward. Compare APRs when deciding between loans. Quicken Loans refinancing calculator will help you estimate your new mortgage payment.