A calculator telling you to refinance your mortgage.Whether you bought a house five years ago or 15 years ago you may be ready to refinance your mortgage.

Refinancing has its perks.  First you should consider why you would like to refinance.  Refinancing your home mortgage loan can be very beneficial for a lot of homeowners.

Some of the reasons you might consider refinancing are; lowering your mortgage rates, or, the equity on your home has increased and you need cash:  college, repairs, vacations, debt consolidation, etc. Another reason could be to shorten your loan term, from a 30-year fixed rate mortgage to a 15-year fixed rate mortgage.

The refinancing process is generally pretty simple, but knowing your options can get tricky. It does take some effort to get the process started. However, the time and effort spent could easily be worth it depending on your situation.

Always do your homework.  When working with your mortgage lender, make sure you look carefully through all of the fees and calculations.

There are a few steps we recommend before you start the process.  Similar to the steps we suggest when you initially take out a mortgage.

Learn your current credit score

Check your credit history and get your credit score. The better your score, the better the mortgage refinance interest rates you’ll be offered. Typically a 740+ score is the top tier for rates.

Research your home’s current value

This doesn’t mean that you have to get a full on appraisal.  A simple check of your neighborhood’s recent sales comparables online will do just fine. The last 90 days are the most relevant within the same square footage range.

Shop for your best mortgage rate

Keep in mind you don’t want too many inquiries into your credit score, so be mindful of your timeline.  It’s best to do all of your searching within a two-week period as the credit agencies usually understand when this process is taking place.

Know your all-in costs

Your mortgage lender should be able to inform you of all of the costs associated with refinancing.  You can expect fees like; application fees, the cost of an appraisal, origination fees, a document processing fee, an underwriting fee, a credit report charge, title research and insurance, recording fees, tax transfer fees and points, to name several. Lenders charge different fees so get a thorough explanation of what are determined by their company versus third party providers (like title, appraisal etc).

Lock your rate

Work with your lender to decide whether or not, and when, to lock your mortgage refinance rate.

Have cash on hand

There are likely to be property taxes and insurance, closing costs and other expenses to pay at closing, so be sure to set aside enough to cover them.

It’s also good to know that refinance options are generally grouped into three categories: rate-and-term, limited cash-out, and cash-out refinances.

Rate-and-term refinance usually changes your mortgage rate, your loan term, or both. The refinance fees are normally paid by you or the lender (typically through higher rates).

Limited cash-out works very similar to the rate-and-term refinance, except the closing cost is added to your loan balance.

Cash-out refinance converts a portion of your equity into cash, that cash is then used to pay on the closing costs and give you money to do what you need with.

Talk with your mortgage lender to find out if refinancing is right for you.  If rates are lower than you’re paying now, it might be a good time to consider refinancing your home. Please call one of our mortgage planners for sound advice or to ask questions.

The Certo Team
55 N. Arizona Place Suite #103
Chandler, AZ 85225

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