What is home refinancing?
You have a home loan and don't like the payment terms -
the amount you pay every month or the number of years you have to pay off
your loan. You could refinance - meaning get a different loan
to replace the existing loan. So you are refinancing your home
with a new loan that you like with a lower interest rate, lower monthly
payment or one that has a fixed interest rate.
What do you need to know before you look to refinance?
- Get a rough idea of your home's value. May be you could check out the local newspaper or www.craigslist.org for other homes selling in your area.
- Check your credit rating and credit report. If you see a problem, request a correction.
- Review your recent mortgage statements to get an idea of what and how much you are paying.
Is there a closing cost when you refinance?
Refinancing has a closing cost just like your current home loan.
It is mostly the same amount whether you go with a new lender or refinance with
your current lender. You might not have to pay anything up front as
this closing cost can be added to your loan amount.
What is PMI (Private Mortgage Insurance)?
If you borrow more than 80% of the home value, you might have to pay PMI.
PMI is collected with your mortgage payment and is a
little extra ($50 - $100 approximately) every month.
You don't have to pay PMI if you put down 20% when you buy the house
or get an 80/20 loan - a first loan for 80% (so you don't require PMI)
and a second loan for the remaining 20% (second loans don't require PMI).