Are You Thinking About Refinancing Your Home?

When you refinance your home, you essentially replace your existing mortgage with a new one. This can be beneficial for several reasons, such as obtaining a lower interest rate, consolidating or paying off bills, or getting money for home improvements or repairs. Here are some key points to consider before refinancing:

Benefits of Refinancing

1. Lower Interest Rate: Refinancing to secure a lower interest rate can save you money if the new rate is at least 2% lower than your current rate and if you plan to stay in your home for at least three more years.

2. Debt Consolidation: By refinancing, you can consolidate bills and pay off debts, which might reduce your total monthly payments. However, your monthly mortgage payment could be higher, and falling behind on these payments could result in losing your home.

3. Home Improvements: If you need money for home repairs, you may qualify for a low-interest government loan.

Finding a Lender

To find the best refinancing deal, consider the following steps:

1. Compare Multiple Lenders: Contact at least three lenders to find a loan with the lowest interest rate, points, and fees.

2. Check Licensing: Ensure the lender is licensed and in good standing by contacting the Department of Corporations at (800) 347-6995.

3. Consider Mortgage Brokers: Brokers work with multiple lenders to help you find a suitable loan. Verify that they are licensed with the Department of Real Estate by calling your local office.

Costs of Refinancing

Refinancing comes with various charges, which can differ between lenders. These charges include points and fees, where each point equals 1% of the loan amount. Shop around and negotiate for the lowest rates and fees.

Common Loan Fees

1. Appraisal: To determine the current value of your home.

2. Recording: Fees for recording the new mortgage.

3. Title Report: Ensures the property title is clear of any liens.

4. Escrow: Fees for managing the escrow account.

5. Credit Report: To check your creditworthiness.

6. Document Notary: Fees for notarizing documents.

7. Wire Service: Costs for transferring funds.

8. Messenger Services: For delivering documents.

9. Document Preparation: Fees for preparing loan documents.

10. Loan Origination: Fees charged by the lender for processing the loan.

Right to Cancel

After signing the loan papers, you have a right to cancel the refinancing within three business days. However, this right does not apply if you are refinancing a rental property. Note that credit report and appraisal fees are non-refundable if you cancel.

Before Signing

1. Review All Documents: Carefully read all loan documents, including the Truth in Lending Disclosure, which outlines the loan's terms and conditions.

2. Settlement Statement: Check the fees you're being charged and the accounts being paid off.

3. Verify Promises: Ensure that everything promised by the lender is documented. If anything is unclear, ask for an explanation before signing.

Refinancing can offer significant financial benefits, but it’s crucial to understand all aspects and costs involved. Always do thorough research and consult with financial advisors to make an informed decision.