What are the costs of refinancing?

All mortgages have costs associated with refinancing. The two types of costs are “recurring” and “non-recurring”. The recurring costs are for items you pay regardless of refinancing, items such as property taxes, interest on your mortgage and home owners insurance. Non-recurring closing costs only occur during a refinance, such as title insurance, an appraisal, escrow fees, a notary and lender fees. All these fees are paid, even with a “no-cost” mortgage.

How do I avoid starting the clock over when I refinance to save even more money?

The best way to take advantage of a lower interest rate from a refinance is to continue making the same payment as your current loan. This will shave time off of paying your mortgage and more importantly the amount of interest you pay.

How much do I need to save in order for a refinance to make sense?

The answer to this varies on several factors, and not just the costs associated with a refinance. One factor is, how long do you plan on keeping your home? If the costs of refinancing are recouped within that period it may be prudent to refinance. The other consideration may be if you are planning to move from this home, but keep it is a rental property. In this case you may chose to lower the term to have your home paid off sooner or change it from an adjustable rate to a fixed rate to reduce your risks of having a rental property.

Do I have to have my home appraised for a refinance?

Depending on the type of home you own or are buying appraisals are always required. However, increasingly some loan approvals are allowing a computer based valuation model to determine your homes values which eliminates the need for a full appraisal. However, if your home is in a unique area, has a high home value or you have little equity often times you will be required to have a complete appraisal. Appraisals are also important to assist the bank in determining the value of a home that was either bought under market recently and/or has received a complete renovation.

Will my property taxes go up if I refinance?

A common misunderstanding is that when your home is appraised for higher than your current property taxes are assesed that your tax bill will increase. The home appraisals used for buying or refinancing a home is never sent to the county assesor by the lender or the loan officer. It is only used to determine your loan qualifications. However, if you are disputing a higher property value that the assesor is usinig for your property tax bill, you can send your recent appraisal to them. Check out how to contact various county assessors to appeal your value here.

Can I have a co-signor for my mortgage?

A co-signor is treated the same as a co-borrower. Conventional loans do not currently allow a person who is not going to live in the home to be on the loan if it is for a primary residence. FHA currently allows a non-occupying co-borrower to help in qualifying for a mortgage. However, the co-borrower’s debts will be added to yours as well as their income in determining qualifications. Investment home purchases allow people who do not live in the same home to buy together, as long as there is a joint ownership.

My spouse/co-borrower has bad credit, will this affect my mortgage application?

Banks use the middle score of all applicants for a mortgage. If you or your fellow applicant has a credit score under the minimum required by the bank than only the higher credit score borrower is able to apply for the loan. This means that only their income can be used to qualify as well.