Tips On Refinancing Your Mortgage

Saturday, March 1, 2008

YOUR MONEY From the Federal Reserve Board Tips On Refinancing Your Mortgage (NAPSA)—If you are thinking of refinancing your mortgage, remember to shop around, com- pare loan terms and negotiate with lenders. Refinancing allows you to switch to a different mortgage with terms that you think are more beneficial. If your credit score has improved, you may be able to get a loan at a lower rate. Or you may want to refinance for a longer term to lower your monthly payments. When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Lenders will look at the amount of the loan you request and the value of your home, determined from an appraisal. If the loan-to-value (LTV) ratio does not fall within their lending guide- lines, they may not be willing to make a loan or mayoffer you a loan with less-favorable terms than you already have. Be prepared to pay closing, or settlement, costs to refinance. Lenders are required by federal law to provide a “good faith esti- mate” of your closing costs within three days of receiving your loan application. The estimate should give you a detailed approximation of all costs involved in closing. Review these documents carefully and compare these costs to those for other loans. You can also ask for a copy of the HUD-1 settle- ment cost form one day before you are due to sign the final documents. When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgageinto a new loan. There are a numberof online mortgage calculators that are designed to calculate the effect of refinancing your mortgage. These calculators usually require information about your current mortgage, the new loan that you are considering and the upfront or closing costs that you will pay for the loan. The calculator will then show the amount you will save compared with the costs you will pay and how long it will take you to break even. Shop around and compareall the terms that different lenders offer—both interest rates and costs. Shopping, comparing and negotiating can save you thou- sands of dollars. For more tips and a link to a refinancing calculator, visit the Federal Reserve Web site at www.federalreserve. gov.