Essential Factors That May Affect Mortgage Refinance

Checking out conventional, FHA and VA Mortgage Rates is crucial in getting the perfect mortgage. The same rules apply in refinancing home loans. Additionally, homeowners must also take note of some important elements that may affect refinancing. Some people tend to be over confident with their properties that they forget some key elements that may affect refinancing process. Get to know these elements and avoid stalling refinance processing and extremely expensive fees.

Home Listing

Some people want to sell their homes for various reasons. They may be looking forward to invest in a different property or simply need the money. Selling means listing the property for buyers to see. However, some homeowners change their minds after some time then apply for refinancing. This is a problem as mortgage won’t approve refinancing.

A person who listed his house then want to refinance must remove his property from the listing. But this is only the first step. If the house was listed, owners must wait for six months after removing their homes from property listings before being eligible again for refinance. Hence, buyers who need the money must ensure the house is not listed and apply for refinancing right away. Those who have listed must remove the property from listings immediately, so the waiting time will begin running.

Frequency of Refinancing

Refinancing may be an infrequent thing for some homeowners. However, lenders allow people to refinance multiple times, but with a catch. Buyers may find themselves experiencing the consequences of frequent refinancing. Not only does it affect their financial profile, accompanying costs with refinancing must also be paid, which means they are accumulating more loans than expected.

Home Equity

Lenders allow buyers to refinance or get cash out due to their properties’ equity. Equity refers to the value accumulated on the house through mortgage payments, market value, and remaining loan amounts. Lenders easily approves homeowners with high equities on their properties while rejecting applications from those who are underwater on their loans. Underwater means the amount borrowed is much higher than the property’s current market price resulting to negative equity. Having negative equity means homebuyers can’t refinance or get their needed cash for emergency use.

Rate Locking

Refinancing is the best option in shifting from your current home loan to something with cheaper rates. However, this will only be successful if homeowners locked their interest rates. Locking rates means you want to make sure you’ll get that rate when you signed your documents. Some people think that obtaining interest rate quotes is enough for them to secure their preferred rates. They will then be surprised that the interest rate changed in time for filling up their documents. There’s a high chance of paying higher interest rates and wasting the opportunity to save money. Be sure to lock your preferred rate upon seeing to guarantee your savings.

Not Using Refinance Calculators

Refinance is like getting purchase loans in terms of calculator availability. Using online calculators give owners an idea about refinance rates or if they can refinance or not. Not using these vital tools will affect the process of getting refinance or saving money. They may only get unbeneficial rates rather than saving cash on their monthly mortgage payments.

Not Shopping for Deals

Shopping for rates is also imperative if you want to save money. Refinance comes in multiple deals as offered by lenders. Not only is shopping essential in comparing deals, it exposes homeowners to an array of flexible terms that buyers will find beneficial in the long run. Lenders are different companies, implying differences in lending policies. Although some aspects of lending are generally the same, many customers tend to work well with specific lenders, allowing them to pay loans on time with ease.

Prepayment Penalties

Prepayment penalties refer to fees you need to pay on your current loan. This fee is paid as part of borrower-lender agreement regulating the amount borrowed and timeframe of payment. For example, lenders can let borrowers pay around 20 percent of the loan balance per year. Refinancing while prepaying mortgage will result to higher prepayment fees.

Whether you’re applying for streamline refinance or other refinancing schemes, knowing these elements will be your way to save money. Avoiding issues and applying specific procedures will maximize the benefits of refinance and make your loan slightly lighter to pay.

Max is a native Phoenician who is working at The Eddie Mortgage Team. To learn more, read our new featured article about FHA Loan.