Maybe Refinancing?

Why should I refinance?
Is refinancing worth it?
What are the costs of refinancing?
What are the different loan refinancing fees?

Why Should I Refinance?

If you have a low, 30-year fixed interest rate you're in good shape. But if any of these Five Reasons applies to your situation, you may want to look into refinancing.

1. Decrease monthly payments. If you can get a fixed rate that's lower than the one you currently have, you can lower your monthly payments.
2. Get cash out of your equity. If you have enough equity you can get cash out by refinancing. Just decide how much you want to take out and increase the new loan by that amount. It's one way to release money for major expenditures like home improvements and college tuition.
3. Switch from an adjustable to a fixed rate. If interest rates are increasing and you want the security of a fixed rate, or, if interest rates have fallen below your current rate you can refinance your adjustable loan to get the fixed rate you're looking for.
4. Consolidate debt. You can refinance your mortgage to pay off debt, too. Simply increase the new loan amount by the amount you need and the lender will give you that cash to pay off creditors. You'll still owe the lender but at a much lower interest rate - and that interest is tax-deductible.
5. Pay off your mortgage sooner. If you switch to a shorter term or a bi-weekly payment plan, you can pay off your home earlier and save in interest. And if your current interest rate is higher than the new rate, the difference in monthly payments may not be as big as you'd expect.

Is refinancing worth it?

Refinancing costs money. Like buying a new home, there are points and fees to consider. Usually it takes at least three years to recoup the costs of refinancing your loan, so if you don't plan to stay that long it isn't worth the money. But if your interest rate is high it may be smart to refinance to a lower interest rate, even if it is for the short term. If your mortgage has a prepayment penalty, this is another cost you will incur if you refinance.

Use the reasons above as a guideline and determine whether or not refinancing is the right thing to do.

What Are the Costs of Refinancing?

Here's what you can expect to pay when you refinance:

The 3-6 Percent Rule

Plan to pay between 3% and 6% of the amount of the new loan amount (if want cash-out, the loan amount will be larger). Yet some lenders offer no-cost refinancing in exchange for a higher rate.

Getting to the Points

Points play a big part in how much it'll cost to refinance - the more points you pay, the lower your interest rate. Points are a good idea if you're planning to stay in your home for a while, but if you'll be moving soon you should try to avoid paying points altogether.

Negotiate the Fees

Be aggressive and investigate the fees your lender is asking you to pay. You may not need an appraisal, or your loan-to-value may be such that you no longer need Private Mortgage Insurance. Sometimes if you refinance with your current lender they won't need a credit report. With a little research it's amazing how much you can save.

Different loan refinancing fees

1. Application Fee: This covers the initial costs of processing your loan application and checking your credit.
2. Appraisal Fee: An appraisal provides an estimate or opinion of your property's value.
3. Title Search and Title Insurance: A Title Search examines the public record to discover if any other party claims ownership of the property. Title Insurance covers you if any discrepancies arise in ownership. (A reissue of the title can save 70% over the cost of a new policy.)
4. Lender's Attorney's Review Fees: In any financial transaction of this scope, a lawyer's participation ensures that the lender isn't legally vulnerable. This fee is passed on to you.
5. Loan Origination Fees: This is the cost of evaluating and preparing a mortgage loan.
6. Points: These are basically finance charges you pay the lender. One point equals 1% of the loan amount (for example, one point on a $75,000 loan is $750). The total number of points a lender charges depends on market conditions and the loan's interest rate.
7. Prepayment Penalty: Some mortgages require the borrower to pay a penalty if the mortgage is paid off before a certain time. FHA and VA loans, issued by the government, are forbidden to charge prepayment penalties.
8. Processing Fee: This covers the credit report(s) and processing the loan from application through the closing date. We at Naples Home Loans take pride in helping you through the mortgage process from start to finish.
9. Miscellaneous: Other fees may include costs for a VA loan guarantee, FHA mortgage insurance, private mortgage insurance, credit checks, inspections and other fees and taxes.