I have purchased two homes in my life, but I have never had the opportunity or means to refinance my home. In both purchases, we had low interest rates. The rate really didn't drop low enough to make it worth it for us. But because of the recent drops in the interest rates, I recently started the refinancing process for the first time in my life.
My husband and I qualified for a 4.5% fixed rate & will likely save a nice chunk of money monthly. And, with our estimated closing costs, it should really only take about 3 years for us to break even and really start saving money. Because we're planning to stay in our house for a long time, if not forever, this was a no-brainer for us! These days, due to the high volume of people refinancing their homes, it's supposed to take around 45 days to close - provided everything goes well. So our lender told us to get everything together a.s.a.p. The faster we move, the faster he can move. It sounds simple, I know. But you'd be surprised how many people don't know that. And the lending process involves a LOT of paperwork. Here are a few things that surprised me:
- Sometimes, if you have enough equity in your home, you can roll the closing costs into your new loan at the new rate. So you may not have to bring anything to the table. Obviously, this varies for everyone. We're planning to pay the appraiser ahead of time & we may have to bring escrow money (for insurance and taxes) to closing. But that should be about it, we hope!
- Even if you have plenty of equity in your home, the banks require a new appraisal. Skip Dyer of ProActive Mortgage explained it to me this way, "There are many markets in the country where property values have declined significantly. Even though our area has been relatively well insulated from the bursting of the housing bubble, most mortgage loans are underwritten at a national level and underwriters don't know what's happening to housing values in every town and subdivision (remember the old adage - all real estate is local). Therefore, lenders are requiring recent appraisals on every transaction regardless of the equity in the property."
- Some lenders have flat fees for refinancing, others charge around 1% of the loan value, and still others can charge MUCH more. So make sure you get a good-faith estimate from your lender and look at both the rates & the fees.
- NOT everyone qualifies for the "low, low rates" you read and hear about. Your credit score must be high enough to qualify.
I am certainly not an expert in this field. As I explained, I have never done this before. These are just a few things I have learned in just my few days of going through this process. If you have questions, I highly recommend calling a local lender.
-- Kristin Wilson