Refinancing your mortgage can seem like a big decision. You’re looking for better rates, more affordable payments or a shorter loan term. Before you go any further, it’s natural to have some questions.
These are questions mortgage brokers hear all the time. They provide straightforward advice to guide homeowners through the refinancing process. You can save yourself time and money by knowing what to ask if you plan to refinance.
This blog will answer the most common questions refinance mortgage brokers get. It will also provide simple answers to help you make choices wisely.
How Much Will I Save By Refinancing?
This has been the most asked question, and for good cause. Why do people refinance? To save money. But how much you can save is based on a few factors. Check your existing interest rate first.
It needed to be at least 1% lower than your previous rate to make it worthwhile. Then, verify your loan balance and remaining years. The larger the loan and the longer the term, the more you can save.
Closing costs matter, too. They need to factor in achieving real savings. Whom they refinance: Some choose to shorten their loan term. That might raise monthly payments but reduce the total interest.
Others wish to reduce monthly expenses. A broker can crunch the numbers for you and walk you through your options. Refinancing should help your finances over the long haul.
What Do Closing Costs Actually Entail, And Am I Required To Pay Them In Advance?
People often get surprised by closing costs. They typically run between 2% and 5% of your loan amount. That could be several thousand dollars. These expenses include appraisal fees, title insurance, loan origination fees and more.
The common question that people have is do they pay all of it up-front. The answer is no, not always. Some lenders let you roll the costs into your new loan.
That means you won’t have to pay out of pocket but you will pay interest on those costs. Some provide “no-closing-cost” refinancing. This is great, but it usually is at a higher interest rate.
Does Refinancing Affect My Credit Score?
It is another common concern. The short answer is yes, but a little—and only for a little while. The lender then performs a hard credit check when you get an application to refinance.
This can cost you a few points from your score. If it’s within a few lenders during a short period of time, that’s okay. Credit scoring models treat those inquiries as a single request if made within 30 to 45 days.
If you do that, then as long as you continue making all your payments on time, your score will rebound. Sometimes refinancing can even help your credit in the long run.
How Long Does It Take To Refinance?
Most people want to know how quickly they can do it.” Refinancing typically takes 30 to 45 days. It varies by lender, your documentation, and how quickly you respond to requests.
First, you complete the application and provide information, such as pay stubs, tax returns and bank statements. You’re then processed by the lender, who will review your info, order an appraisal, etc.
But delays are possible. If there are mistakes on your credit report, or if your income is difficult to verify, it may take longer. A mortgage broker can help smooth the process with the best company refinance mortgage.
Will Refinancing Be Worth It If I’m Going To Move Soon?
This is a wise question to ask. If you want to sell your home soon, refinancing probably isn’t worth it. That’s because reaching the break-even point takes time.
You have to recoup the cost of refinancing before you move. To calculate your break-even point, take your total closing costs and divide that by the amount you will save each month.
If, for example, you’ll save $200 a month and your closing costs are $4,000, you’ll break even in 20 months. If you intend to move before that date, you risk losing money.
Conclusion
Refinancing your mortgage comes with a lot of questions, and that’s a great thing. The more you ask, the better it is for you. Brokers are hearing the same concerns from a lot of people.
They guide you through the whole process as needed. If you need to lower your rate, shorten your loan term or trim your monthly bills, understanding what to expect helps.
Ask about savings, costs, timing, impact on your credit and your long-term plans. Refinancing is much less stressful and more rewarding with the right questions and clear answers.
