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Refinance OptionsThere are several things to consider when making a decision to refinance your mortgage. It is important to do your homework and research several lenders to determine the various charges and legal fees that will apply to your loan and those that the lender may decide to waive. Try to find a lender that will give you a rate cut, no matter how small. Some mortgage companies may be willing to waive routine financing charges related to fees for your application, appraisal and legal fees. These can cut $1,500 to $3,000 from your up front costs. However, if the lender does agree to waive these fees, they will charge you a rate that is higher than the lowest prevailing interest rate. Take the time to review and analyze interest rates and “points” charged by If you plan to stay in your home for only another year or two, paying points would not make good financial sense. However, if you plan to stay in your home for four or five years, paying points and closing costs to get the lowest possible interest rate may be the way for you to go. The norm is that the lender will charge you more points if they agree to a lower interest rate on your loan. Those who offer you refinancing with no points are likely to charge you higher interest rates. One way to get a lower interest rate and avoid paying out cash up front is to add the closing costs and points to your refinanced mortgage. If you have had your current mortgage for several years (at least three), you have likely paid off several thousand dollars on your balance. Consequently, you may be able to add your points and closing costs on to your new mortgage and wind up with a new loan that is smaller than the original one as well as a lower interest rate and lower monthly payment. How Lenders Decide Whether or Not You Are Creditworthy Lenders use a score to determine if the applicant is a good credit risk. A statistical score is used to assess the likelihood that you will pay back your loan. Possible scores range from 350 which indicates a high risk to 950 which is an excellent and low risk. The most commonly used credit scores are FICO scores. These were developed by Fair Isaac and Company, Inc. to be used by credit reporting agencies. Credit scores consider only the following information that is contained in your credit profile:
Paying your bills on time is the most crucial factor in your credit score. Paying off debt is considered more important than moving it around from one account to another and balances on credit cards should be kept as low as possible. |
different lenders to see what combination works best for you. Most lenders offer a range of interest rates and associated points. A point is equal to one percent of the total amount of the loan. For instance, two points on a $200,000 mortgage loan would add $4,000 to your cost of refinancing.  |
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