Is it a good time to refinance?

People often ask Norstar Mortgage about refinancing. They want to know if they should jump on the refinance bandwagon. The answer depends, as it has a lot to do with timing. How do current mortgage rates compare to your original mortgage rate? Will the savings cover the costs? Let Norstar Mortgage help you determine if it's time to seize the opportunity.

Benefits of Refinancing

Save Money

Lower your interest rate, shorten the term, or get out of an adjustable rate mortgage. The slightest changes can lead to short term and long term savings.

Cut Costs

If you've built up enough equity, you may be able to eliminate your mortgage insurance (PMI or MIP) and put that money right back in your pocket.

Access Cash

Tap into your equity and borrow a little extra money. Consolidate debt, pay for school or make some improvements around the house.

When you refinance, you are paying off your original mortgage and opening a new loan. As with any mortgage loan, there is a list of closing costs to consider. To help you make an informed decision, Norstar Mortgage can show you a comparison of the total cost of the refinance versus the total monthly savings.

Get a quick rate quote for a refinance if you'd like to compare apples to apples. Then give us a call and we'd be happy to work up some numbers for you.

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How Much Can I Save by Refinancing

Common Refinance Questions

Refinancing is simply getting one mortgage loan to pay off another. They are done for a variety of reasons, but usually to save money. But how much can you save and is it worth it? Here are some common questions to help you understand how a refinance works.

How much does refinancing cost?

When you refinance a loan, there are closing costs involved, including lender fees, appraisal fee, a settlement fee and title insurance. Typically, the total closing costs for a refinance runs between 1% & 2% of the loan amount.

Is there a general rule to help determine if a refinance is worth it?

If you're looking for a rule of thumb, think of the number 2. You should aim for a 2% lower interest rate in order to ensure that the savings will off-set the costs of refinancing, provided you’ve lived in your home for 2 years and plan to stay for at least 2 more.

While this rule is useful as a point of reference, it shouldn’t be adhered to strictly. If you think you will stay in your home for 5 or more years, for example even a 1% interest rate reduction will pay off for you. Additionally, with low- cost and no-cost refinancing options available, the cost of refinancing can be recovered much more quickly.

What are points?

Points (or discount points) are a way of lowering your interest rate. By paying 1% of the total loan amount up-front, a borrower can lower his interest rate by about 1/8%.

Should I modify my loan or apply for a refinance?

It depends. When you refinance, if you can get a lower interest rate, you can calculate if it's enough of a reduction to offset the costs. On the other hand, a loan modification is usually limited to either extending the term of the loan or increasing the interest rate.

What is PMI?

PMI stands for Private Mortgage Insurance which protects the lender against default. Borrowers taking out a conventioal loan (as opposed to a government insured loan) with less than 20% down are required to carry PMI. The cost of the insurance is added to the monthly mortgage payment.

Will I need to get an appraisal when I refinance?

More than likely, your lender will require an appraisal. A current home appraisal lets the lender calculate the level of equity you have in the home. If the value of your home has increased, a current appraisal can work in your favor.

Does bad credit exclude me from a refinance loan?

Not exactly. When considering a refinance loan it's important to remember that the better your credit score the better interest rate you can get. So if you don't have perfect credit you can still qualify for a refinance loan but you'll want to make sure that you're lowering the interest rate on your loan enough to make a refinance worth it.

Do I need to have equity in my home to refinance?

Yes. The general rule is that you need to have 90% loan-to-value ratio before you can refinance. This means that your home is worth about 10% more than the loan that is current on the house. Additionally, your home will need to have increased in value since you purchased it.

Can I get cash from a refinance loan?

Yes. Depending on the type of refinance loan you opt for, you can take out cash to use for bills, home repairs or whatever you might need it for. This option however should be carefully discussed with us.

How long does it take to go through the refinance process?

A typical refinance usually takes between 2 and 4 weeks from start to finish. The more organized you are with your documentation and the more responsive you are to any followup requests, the faster it will go. Getting the home appraised is usually where most hang-ups occur so plan on scheduling the appraisal as soon as feasibly possible.

 

What documents will I need for a refinance.

If you’re thinking about refinancing, start to collect and either scan or take clear photos so that you have digital copies of these documents for each borrower to be listed on the loan. You may also want to obtain a free copy of your credit report so that you can review it for any inaccuracies and begin any corrective actions.


•    Driver's license
•    Social security card
•    Recent pay stub
•    Prior year's W2
•    Prior year's federal income tax filing
•    If self employed, you’ll need prior 2 years federal income tax filings.
•    Most recent mortgage statement
•    Homeowner's Insurance declarations page
•    Recent two years of real estate/school tax receipts*


*Every lender will require proof of real estate/school tax payments and you have two choices. You can provide the proof yourself and save a few dollars or your lender can pay a third-party to obtain a tax certification at your expense. If you pay your real estate/school taxes from an escrow account, or if you don't have the receipts, you can formally request a copy. Unless you live in Philadelphia county, you'll need to send a letter to your tax collector along with a self-addressed stamped envelop. There may be a small fee so either call or check the county website first. If you take the time to do this now, you'll avoid a $55 tax certification fee later.