4 Important Refinancing Tips

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Filed under: Mortgage Refinancing

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One common question from homeowners is always whether or not they should refinance their mortgage.

According to a recent article in USA Today by Scott Sheldon of credit.com, you can actually refinance your home as often and freely as you want as long as it is financially sensible.

While this is true, there are a number of factors to consider prior to refinancing.  These include:

1. Closing Costs

If you recently paid fees on your last mortgage, you might lose out by refinancing again a short time later. However, if there will be a big payment reduction or a lender credit refinance scenario, it can be worthwhile.

2. Is there an early “payoff” fee?

Make sure you understand that an early payoff fee is not a prepayment penalty. A prepayment penalty will prohibit you from prepaying any of your principal without incurring a penalty before the specified time frame is up. On the other hand, the early payoff fee is paid to the originating mortgage company on a loan that only lasts on the books for a few months.

An early payoff fee can be charged if the loan is only up to six months old, but can be imposed in time frames as short as three months.

3. Will you need impound account monies?

An impound account is set up by your lender to pay off expenses, such as property taxes and homeowner’s insurance.  If you refinance between February 1 through April 10 or October 1 through December 10, first installment property taxes will be included on your loan estimate at closing.

Remember that title/escrow companies are required to collect for the first installment and second installment of property taxes when refinancing in those calendar months.  This could drastically affect the amount of money you need to close your refinance transaction.

When you begin discussing a potential refi with any lender, ask about property taxes early in the process so there will be no surprises.

4. Will your closing process be different?

If your last mortgage transaction was before October 1, 2015, plan for a different mortgage loan closing process. The Consumer Financial Protection Bureau recently changed the closing process which now requires a homeowner to be more involved. This includes requiring borrowers to e-consent to various consumer and financial disclosures.

If you are thinking about refinancing or have any questions that deal with the mortgage industry, please give me a call and we talk about whatever is on your mind.

Source: http://www.usatoday.com/story/money/personalfinance/2016/01/17/credit-dotcom-how-often-can-refinance-my-mortgage/78877232

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