Mortgage: Should I Refinance? Answers To Your Refinancing Questions

Learn the best reasons to refinance

The decision about whether or not to refinance seems relatively straightforward: If you have a high interest rate and current mortgage rates are lower, then getting a lower rate would seem to be a no-brainer. But a number of factors go into the refinancing decision that may or may not make getting a lower rate worth it.

Can you refinance?

The first question to answer is whether or not you can refinance your existing mortgage into a lower mortgage rate. Credit qualifications have tightened up considerably over the past two years, so even if you were qualified for your original loan you may not be qualified for the same loan today. Any borrowers who obtained no income verification or no documentation loans will not be able to refinance into a new mortgage because all of those programs are gone.

Even fully qualified home owners may find it difficult to refinance if their home has lost value and is worth less than the mortgage amount that they owe on the property. Some borrowers who have loans that are owned by Fannie Mae or Freddie Mac can refinance their loans up to 125% of the value of their home through the government’s Home Affordable Refinance Program (HARP)

For borrowers who cannot qualify with their credit or cannot use the HARP program, a loan modification is probably the best available option.

Is Your Mortgage Loan Too Small?

While you may cut your rate by refinancing, if your loan is too small you might spend more on closing costs than you would save by refinancing. Many of the costs of refinancing are fixed costs that do not change no matter how large or small your mortgage loan.

Reasons That Should Not Hold You Back from Refinancing

Assuming you are qualified, have enough equity and have a large enough mortgage loan, the reasons for refinancing or not refinancing include:

* Don’t I Have to wait a Year to Refinance? The simple answer is no. There is no time limit for refinancing for a borrower, but lenders may impose a four or six month delay on refinancing after closing because they get charged an early payoff fee. But many lenders will accommodate borrowers to keep them as customers. Speak to your loan officer at Total Mortgage.
* Won’t I lose Money if I Just Refinanced and then Refinance Again? No matter how much you paid in closing costs on your last refinance (or purchase loan, for that matter), if you can save money by refinancing again then it is always worth doing. For example, if you refinanced eight months ago at 5.5% paying $6,000 in closing costs, refinancing today at 4.75% will make sense as long as your savings between the new loan and old loan is more than the closing costs on your new loan.
* I Will End Up Stretching My Amortization Term if I Refinance Again. Refinancing continuously into a new 30 year fixed rate will result in your never paying off your mortgage. Also, lenders will only write mortgage loans for terms in increments of five years, so if you refinance nine months after taking out your last loan you cannot get a new loan for 351 months to keep you on track. But this is not a reason to refinance. You can either get a 25 year fixed loan or you can get a new 30 year fixed rate loan and pay a small amount of extra principal each year to put you on track to pay off your loan when the original loan would be due.

The easiest way to see if refinancing makes sense is to speak directly with a loan officer who can pre-qualify you for a loan and help you decide if refinancing makes sense.

Total Mortgage Services, LLC (http://www.TotalMortgage.com) is an industry leading direct mortgage lender and mortgage broker, having funded over $4 billion in mortgage loans since 1997. Licensed in over twenty states, Total Mortgage offers a variety of products and programs including fixed-rate loans, adjustable-rate loans (ARMs), jumbo loans, FHA mortgages and more. Visit TotalMortgage.com for today’s current mortgage rates.

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