REFINANCING

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HOW TO REFINANCE YOUR PROPERTY
Refinancing your home can cut your monthly mortgage payments. It also may allow you to tap into the equity in your home to pay off other loans and credit cards - while still deducting your mortgage interest from your taxes.
Find current interest rates in most major Sunday newspapers (in the real estate section) or contact a mortgage broker.
Identify the type of mortgage you want - fixed, adjustable or a combination of the two.
Compare the new interest rates to that of your current mortgage.
Use the amount you owe on the loan to calculate what the new monthly payment would be by using a financial calculator or an online mortgage calculator. You'll need to know the new loan amount (current loan amount plus closing costs, such as points, title and escrow fees - unless you plan to pay for them out of pocket - the new interest rate, and the number of months of the new loan).
Subtract your current monthly mortgage payment from the new monthly mortgage payment; this is your monthly savings.
Divide the monthly savings into the total cost of the loan (including points, title and escrow fees). This is the number of months it will take to recoup your investment.
Basic lending guidelines will require all home loans will total up to less than 75% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees.
Consider what you are trying to accomplish by refinancing. Do you strictly want to lower your mortgage interest rate, or do you want to pay off other loans and credit cards that have higher interest rates with the equity from your home? If you plan to pay off bills, you must add up all the monthly payments of your credit cards, loans and mortgage that you want paid off and compare that to the new monthly mortgage payment.
Most mortgage interest is tax deductible. Check the Internal Revenue Service's rules to see whether they apply to you.
You can find an online mortgage calculator at most Internet loan sites.
Although refinancing may seem like found money, particularly if you are tapping the equity for cash, remember that it will have to be repaid like any other loan.
The ultimate amount you may save depends on many factors, including your total refinancing costs, whether you sell your home in the near future, and the effects of refinancing on your taxes.
The old rule of thumb used to be don't refinance unless saving 2% on interest. Zero points and low-cost refinancing can negate that theory.
When you apply for a mortgage, some lenders require you to pay a special non-refundable charge ($100-$200) to cover the costs of processing your application.
With a new loan, you may be charged a penalty for paying off your original loan early. So check this first.
The total expense for refinancing depends on settlement costs, interest rate, points, and other costs required to obtain a loan.
You might consider a 15-year, fixed-rate mortgage. Payments are higher, but you pay substantially less interest over the life of the loan and build equity more quickly.

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How To Refinance Your Home

How do you decide if refinancing makes sense? The answer depends on many factors, including tax bracket, the length of time you plan to stay in your home, and refinancing costs.

Difficulty: Hard

Time Required:  Indefinite

Here's How:

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3.   Talk to some lenders to determine the available rates and the costs associated with refinancing (appraisals, attorney's fees, points). Then determine what your new payment would be if you refinanced.

4.   You can estimate how long it will take to recover the costs of refinancing by dividing your closing costs by the difference between your new and old payments (your monthly savings).

5.   Shopping for points as well as interest rates may save you money. As a rule of thumb, each point adds about one-eighth to one-quarter of one percent to the interest rate the lender is offering.

6.   To decide what combination of rate and points is best for you, balance the amount you can pay up front with the amount you can pay monthly.

7.   The less time that you keep the loan, the more expensive points become. If staying in your home for a long time, it may be worthwhile to pay additional points to obtain a lower interest rate.

8.   Some lenders offer to finance the points so that you do not have to pay them up front. Points are added to the balance, and you pay a finance charge on them meaning increased monthly payments.

9.   Settlement costs typically include fees for the loan application, title search, appraisal, loan origination, credit check, and lawyer's services. You also may be required to pay recordation fees or transfer taxes.

10.   With a lower interest, you will have less to deduct on your income tax return. That may increase your tax payments and decrease the total savings you might obtain from a new, lower-interest mortgage.

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12.   You do not have to refinance your mortgage with the same lender that provided youroriginal loan. However, to keep your business, some lenders may offer customers incentives of lower interest.

13.   If you decide on a particular lender, and do not want to let the interest rate 'float' until closing, get a written statement guaranteeing the interest rate and points that you will pay at closing.

14.   The lender must give you a written statement of the costs and terms of the financingbefore you become legally obligated for the loan, as required by the Truth in Lending Act.

Tips:

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