How do I refinance my existing home loan?
The first step to refinancing your home is to identify why you are refinancing. Do you want lower payments? Do you want a shorter term? Do you need extra money? Once you identify why you want to refinance then you are ready to select the proper type of mortgage for your. Some of your choices include:
RATE/TERM: Paying off just your current 1st loan, and replacing it with a new loan that has lower interest rate and payments, or a change to a shorter term--like going from a 30 yr fixed to a 15 or 20 yr fixed term. If you purchased the home with a 2nd mortgage, and want to pay off the 1st and 2nd--this is also considered a rate/term loan. The 2nd must have been done at the same time as the 1st loan though--otherwise, paying off the 2nd loan or line of credit will be considered a cash out refinance. The rate/term refinance will get better rates than if you do a cash out refinance loan.
CASH OUT OPTION
If you have equity in your home, you can refinance for an amount higher than your current mortgage. You can use the difference for home improvement, debt consolidation, or whatever you want. There are limits to how much cash can be taken out, so check with me to get current guidelines. As mentioned in the above paragraph, if paying off a 2nd loan or line of credit that was not obtained at the time of purchase, this will be considered cash out and will be subject to certain rate adjustments.
How do I calculate the value of my property?
Since a mortgage is secured by a piece of real property, getting a correct value is very important. Remember, property value can be determined in a few different ways. It can be valued based on the market value of the property. The market value is what a buyer will pay for it and what other "like" properties in the neighborhood have recently sold for. Value can also be determined based on the the appraised value of the property. The appraised value is what a trained and licensed professional estimates the property to be worth based on an inspection of the property, its neighborhood, and the sale of other comparable homes in the area. After he determines the original value of the home, he then calculates the replacement value by reducing the original value due to factors like deterioration and depreciation.
The appraisal MUST be ordered by the lender or broker. Do not order one yourself unless it is just for your benefit--or you could be paying for 2 appraisals!
Can I make extra payments so I can pay off the loan more quickly?
Depending on your specific loan, and what your state allows, it is often possible to make extra payments to shorten the life of your loan. Extra payments applied directly to principle can have a huge affect on the amount of interest you ultimately pay.