Refi, What Should You Know Before You Refinance?

Refi rates are not as low as they were a few weeks ago but they're still at incredible lows. Today, Bankrate's website is showing rates at 4.25%. That is higher than a couple weeks ago but we have to remember that rates were in the 6% range earlier in the year. Q:Is this a great time to refi? A:YES!

I wish we could still refi with interest rates in the 3% range too... But there's good news! If you act quickly, you can change your rate while we're still at unprecedented lows. This is known as OPPORTUNITY! Don't wait till interest rates get back in the six percent range or higher, again. Act NOW. You'll be glad you did.

Imagine being one of the people who will say "My interest rate is 4.25%" and not someone who says "I wish I had a 4.25% interest rate". You can!

When you're looking into refinancing, you must consider a few things. Let's take a look at them in this article. Get this info and you'll be in great shape because you'll know exactly what is the right direction for you to take.

Knowing the value of your home will help you when you're considering a Refi. If you have 20% equity it should be easier for you to get the loan you'll also have more options available to you. By having this much equity, you'll also avoid Mortgage Insurance (MI) in most cases. MI is at an extra cost and would increase your payments unnecessarily.

By the way, mortgage insurance is an insurance policy that the lender takes out to protect the bank (not you) in case you default on the loan. It's not a policy that benefits you in any way. I'm no tax professional, so what I'm going to say is just opinion, however in my opinion you should avoid having to pay it if you can. It's certainly something that you should weigh, when considering a refi on your home, and it may be unavoidable, but you need to be armed with this information to make the best decision you can.

If you don't have 20% equity, it may be more difficult to refinance but don't quit just yet. There actually are several banks that will allow a refi, with 10% equity. This is where that mortgage insurance will, most likely, come in to play but if the numbers pencil out you might still want to move forward on it.

If you have less than 10 percent equity and your loan amount falls within FHA guidelines, you might qualify for an FHA loan. With an FHA loan you only need a minimum of 3.5% equity. Advantages and disadvantages of an FHA loan are not covered in this article but, for the most part, it's a good loan.

If you already have an FHA loan but want to refi for a better rate, you might consider an FHA Streamline Refi. Streamline refi's will save you money and time since they will typically use the appraisal and income information that's already on file. I won't go in depth on a streamline refi but essentially the amount of paperwork and cost are reduced because FHA will go off your most recent appraisal and may use supporting documents on file to close the loan.

Prior refinancing you should check your home's value so you know how much equity you have. I'm going to recommend you call a local Realtor to give you their opinion of value. You don't need to get a full appraisal, since the bank will do that (unless you're doing a streamline). Most Realtors will give you a CMA for free, in hopes to gain your business in the future.

One last tip is to check your recapture time. Recapture time is the amount of time it will take to recoup what you spent to get the loan. There are some great calculators at bankrate.com and I highly recommend using them.

I hope you found some great value in this article. Please visit our website for more insight when looking into an refi.

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