Sunday, November 14, 2004

Home Refinancing Tips

Home Refinancing Tips

Tip 1. Don't wait until mortgage interest rates drop by 2 percent before you consider refinancing your mortgage.

The decision to refinance your home is dependent on many things, including how long you plan to be in the house, how much lower the interest rate will be on your new loan, the closing costs for the new loan, your equity position in the home, and whether you plan todo a cash-out refinancing.

Tip 2. Using your current mortgage service may or may not save you money and time. The mortgage market is divided into three lines of business: mortgage origination, mortgage servicing and mortgage lending.

If the firm that originated your existing mortgage didn't retain the servicing, then you aren't a current customer. If the firm servicing the mortgage doesn't do originations in your market, then they may not be interested in your business.

It's best to use online lending marketplaces as these specialize in such issues and are equipped to provide services needed at competitive rates.

Tip 3. Many lenders require that you have at least 10 percent equity in your home (i.e., a loan-to-value (LTV) ratio of 90 percent or less). But when using the online lending marketplace consumers are connected to lenders willing to underwrite loans in which the borrower had only 5 percent equity in the home. Beware, however,that low equity loans can involve relatively high mortgage insurance costs.