When you refinance your house, you replace the loan you already have with a new one. You could do that:
Get your interest rate to go down
Bills can be merged or paid off.
Get money to fix or improve your home.
Things to think about before refinancing
You will probably save money if you refinance to get a lower interest rate:
The new interest rate is at least 2% less than what you're paying now; and
You plan to live there for at least three years.
If you refinance to combine bills and pay off debts, you might end up paying less each month than you do now. But your mortgage payment will be more each month. Be aware that you can lose your home if you fall behind on your monthly mortgage payment.
If all you need is money to fix up your house, you might be able to get a low-interest loan from the government.
How do I find a lender?
Most loans are given out by banks, mortgage companies, and credit unions. Here are some tips for finding a lender:
Talk to at least three lenders. Find a loan with the lowest interest rate, fees, and points.
Make sure that the lender has a licence and is not in trouble. Call (800) 347-6995 to get in touch with the Department of Corporations.
Mortgage loan brokers help you find a loan by working with many different lenders. Call the local office of the Department of Real Estate to make sure they have a licence.
How much will refinancing cost?
Different lenders will charge different fees for loans. Points and fees are part of the cost of a loan. Each point is equal to 1% of the loan and is paid to the lender or your loan broker. Make sure to look around and negotiate for the lowest interest rate, points, and fees.
What are the costs of a loan?
Some of the costs of a loan could be:
Appraisal
Recording
Report Title
Escrow
Report on credit
Notary Public
Service Wire
Messenger Services
Document Preparation
Starting a loan
Can I get out of the deal?
Yes. You have 3 business days to back out of the loan after you sign the papers. If you decide to cancel, you can't get your credit report or appraisal fees back. If you are refinancing a property that you rent out, you have no right to back out.
Before you sign
Look over all of the loan papers.
In the Truth in Lending Disclosure, you can find the main loan terms and conditions.
The Settlement or Closing Statement tells you what fees you are being charged and what accounts are being paid off.
Everything you were told about the loan should be in the paperwork. Do not sign something you don't understand. Ask them to explain.
