Refinancing An Existing Home Loan:

You've probably heard it often -- another friend or neighbor has refinanced and is enjoying lower monthly mortgage payments. You may have read headlines that talk about mortgage interest rates reaching historical lows. So, you ask, is now the best time to refinance my mortgage?

Refinancing is essentially paying off your existing mortgage and taking out a new one. This section discusses the basics of refinancing, such as the reasons for refinancing and the steps involved. It also discusses your financing options. After you understand these basics, Suzi Boyle with Evergreen Home Loans can discuss the details further and help you get the refinancing process started.

Why Refinance?

• Obtain a lower interest rate,
• Build equity faster,
• Change loan type,
• Take advantage of an improved credit rating, or
• Draw on equity already built in the home.

Obtaining a lower mortgage interest rate can lower your monthly payment and is the most common reason homeowners refinance. Building equity faster is also a popular reason because owning a home can be one of the safest and most profitable investments you can make.

Eligibility

To help determine if you're ready to refinance, ask yourself these questions:

• How long do I plan to remain in my home?
• How many years remain on my existing mortgage?
• Can I afford the costs involved?
• Will I save money over the life of my loan?

These questions are good starting points to determine your personal eligibility, prior to discussing options with Evergreen Home Loans. Suzi Boyle, however, will evaluate your financial eligibility based on income, current mortgage information, property value, and other information.

Requirements & Costs

Because refinancing involves many of the same steps that you followed to get your current mortgage, you may already know what to expect. You may, however, face a few additional steps and different types of expenses.

Required Information

Similar to the traditional mortgage process, a lender will require you to complete a loan application. The application assesses your financial situation, credit history, the property value, the amount of equity in your home, and other data.

Your lender will require:

• verification of employment and income,
• information about debts and assets,
• account numbers and balances for savings, checking, and other financial accounts,
• a title search,
• a copy of the site survey, and
• an appraisal (in some cases an exterior-appraisal only).

Information about your present mortgage will also be required, such as:

• current monthly payment,
• outstanding mortgage balance,
• status of property tax and insurance payments, and
• the lender's contact information (if you're not refinancing through your original lender).

Time and Costs

Some of the types of fees you paid during the closing on your original mortgage will be charged during a refinance. These may include an application fee, title search and title insurance fees, appraisal costs, loan origination fee, discount points, prepayment penalties, and if applicable, legal service fees.

Sometimes a new appraisal will not be necessary, and some fees and closing costs may be waived. If you refinance through your original Fannie Mae-approved lender, some fees can be negotiated -- such as title search, application fee, and credit report review. Sometimes, a new lender may also be willing to negotiate those fees. And, in some cases, a lender may offer "no-cost" refinancing, which means most of the up-front processing and closing fees are not required. In these cases, however, the lender will typically charge a higher interest rate.

Mortgage Solutions

Choosing a mortgage depends on your wants and needs. Regardless of your reason for refinancing -- be it to lower monthly payments or build equity faster -- you should do your homework.

In the FNMA 'Is Now a Good Time to Refinance?' brochure (PDF), you'll find checklists of mortgage shopping terms and lender-comparison charts. These charts can help you understand what type of questions to ask lenders and will help you to keep records of the information you gather.

Evergreen Home Loans offers a wide range of interest rates and terms. You can lower your rate by paying discount points. A lender may offer, for example, a 6.75 percent mortgage with one point, or a 7 percent mortgage with no points. Typically, the lower the interest rate, the lower the monthly interest payment (depending on the mortgage term), but to keep up-front costs down, you may choose a higher rate with a no points option. In addition, many lenders may allow you to finance points and closing costs as part of the total loan amount -- called a no-cost refinance.

The type of mortgage you select primarily depends on how long you plan to live in your home, your reasons for refinancing, and the amount of monthly payment you can comfortably afford.

Suzi Boyle