Is Refinancing the Right Move for Me?
It all depends on your current situation and your future goals. Benefits can include reducing monthly payments and helping cash flow, letting you access cash, consolidating debt, or even eliminating Private Mortgage Insurance. All are significant benefits and can be compounded.
Because refinancing incurs some third-party fees, such as title fees and appraisal fees, if your goal is to lower your monthly costs, it is essential to determine how long it will take you for your monthly savings to offset these up-front costs.
If you hit your break-even point in less than three years, it is probably wise to refinance. If it takes more than seven years, it may not make sense at this time. You can run your numbers through our refinance calculator to see what your savings may be and how long it will take to hit your break-even point.
Basic Questions About Refinancing
Refinancing may make sense for homeowners who:
- Want to take advantage of lower rates.
- Want to move from an ARM to a fixed-rate loan.
- Want to take advantage of their high home equity to access cash.
There are three refinance categories: rate-and-term, limited cash-out, and cash-out.
Choose this option to change your mortgage rate, loan term, or both. They typically carry lower interest rates than cash-out refinances.
Benefits are similar to the rate-and-term refinance, except the closing cost is added to your loan balance, so you don’t have to pay anything out of pocket.
In this case, your new mortgage is for a higher amount than the balance of your current mortgage. This lets you convert a portion of your equity into cash. Increasing home values tend to be the reason for the interest in a cash-out refinance. It’s easy to access money to cover other expenses or pay for an investment.
As a mortgage broker, we represent your interest rather than the interest of a lending institution. With access to a wide range of mortgage products, we can offer you the greatest value in terms of interest rate, repayment amounts, and loan products. We do the shopping for you and get the best available deal with the best rate/point combination combined with the best service.
Costs to refinance vary based on your lender, and they can add up quickly. Here are a few examples of refinancing expenses:
Mortgage application fee
The application fee is something that some lenders charge to cover your loan processing and credit check. Application fees are typical $0 to $999.
An appraisal is an essential service that estimates the value of your home. It’s a necessary step in the mortgage process that helps determine your maximum loan amount. The fees are charged by the Appraisal Management Company (AMC) or appraiser and not by the lender. Lenders require their borrowers to make a one-time, upfront check or online payment to pay for the appraisal fees. This protects lenders from borrowers who start the process, complete the appraisal, and afterward either change their minds or do not qualify for the loan. In Hawaii, the average cost of an appraisal is $650. Depending on equity, credit score, income, and other factors, an appraisal requirement might be waived on some transactions.
Escrow, Title search, and title insurance
The search charge covers the cost of examining the public record to research the deed of your home, ensuring no one else has a claim on the property. And, title insurance protects the homeowner if someone sues and says they have a lawsuit against the home before the homeowner purchased it. Title Insurance and Escrow costs vary based on the property’s value, and typical costs are 0.6 to 1% of the loan amount.
Depending on your loan program and down payment amount, you may be required to pay mortgage insurance. Mortgage insurance protects a lender in the event you default on your mortgage. Mortgage insurance starts when the down-payment or equity is less than 20%, and increases in price as equity goes down. Pricing also usually varies based on credit score.
Some of these costs are built into the APR rate, so it’s important to keep an eye on the APR vs. the rate of the loan itself. There are also ways to offset these costs by getting a slightly higher rate. Either way, we are the experts and fiduciary to represent you and your financial interests first and foremost to ensure you get the best rate and terms, and the fees are a significant part of that equation.
For example, unlike most mortgage brokers, we proudly do not charge our clients any third-party processing fee.
Expect to provide paperwork and to answer questions. The more prepared you are, the easier it is to get you closed — fast. Here’s how we do it at Mana Mortgage:
Apply in person, over the phone, or pre-qualify online in as little as 15 minutes. With your approval, we’ll begin income verification and a credit check. After reviewing all available loan options based on your individual situation, we’ll present to you a lender and mortgage program that makes the most sense for you.
From there, we’ll collect your financial documents, which you can share via our secure online portal.
Expect to share:
- W2 statements (typically last one or two available)
- Federal tax returns (if self-employed)
- Recent pay stubs (typically enough to cover 30 days of pay)
- Copy of driver’s license
- Assets (typically 2 months bank or asset statements)
- Statements of outstanding debt (car loans, credit cards, student loans, etc.)
- Depending on your situation, there may be other documents needed to process your loan
Interested in refinancing your mortgage? Your next step should be a 10-minute call to a Mana Mortgage Loan Officer.
There are never any upfront fees to consider. Plus, we have access to every loan in the industry, so you can feel confident your refinance needs are being met quickly.
Call us today, or schedule an appointment online so we can have a Loan Officer call you!
The Mana Mortgage Difference
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