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Refinance FAQs
What does it mean to refinance my home loan? Why is refinancing a mortgage beneficial? If you’ve been told to consider refinancing as an option, you may be asking some of these questions. Find your answers in the FAQ’s below.
A refinance is a new loan that replaces an existing mortgage — typically to get more favorable terms or payment options. Let’s say you purchased a home with a 30-year fixed rate mortgage at an interest rate of 4.75%. A few years later, you notice that interest rates are hovering around 4.25%. While that 0.5% difference might not seem like much, it can add up to a significant amount of money over the life of your loan.*
Refinance Example:
| 30 YEAR FIXED | 15 YEAR FIXED | |
|---|---|---|
| % Down | 20% | 20% |
| Sample Closing Costs | $4,800.00 | $4,800.00 |
| Loan Amount | $200,000.00 | $200,000.00 |
| Sample Rate | 4.75% | 4.25% |
| Sample Loan APR | 4.957% | 4.604% |
| Est. Monthly Payment | $1,043.29 | $1,504.56 |
| Total Payments | $375,588.00 | $270,820 |
| Total Interest | $175,588.00 | $70,820 |
The calculation above assumes annual amortization. This calculation is provided as an illustration to demonstrate potential savings. It is not intended to provide investment advice, nor is it a guarantee of applicability or accuracy in regard to your personalized circumstances. Not all borrowers will qualify for the rates listed above. This is not a loan approval. Estimated monthly payment does not include homeowners insurance or taxes. Actual payment will be higher. Annual Percentage Rate (APR) incorporates fees into a single rate so that it is possible to compare loans with different rates, fees or terms. Please seek advice from a licensed loan officer to see if refinancing may be right for you.
*Refinancing may result in higher total finance charges over the life of the loan.
Refinancing is a common solution for homeowners who want to lower their interest rates, adjust the length of their mortgages, change the type of their mortgages, or use their existing home equity to fund a large expense, like a renovation or home repairs, through a cash-out refinance.
You’ll be replacing your current loan with a new one, so it’s important that you have a specific goal when considering refinancing.
The process for refinancing your home will likely be similar to the steps you went through to get your current loan. LeBlanc Home Loans, Inc., doing business in the State of Texas will look at your income, credit score and the value of your property. If refinancing your home sounds like something that fits with your homeownership goals, then finding the right type of loan is the next step.
After selecting and applying for a loan, the approval process begins. For approval, we must verify your credit, employment history, assets, property value, and anything else required by your particular circumstances. Some programs use information you provided when you first got your mortgage, which helps to streamline the process.
LeBlanc Home Loans, doing business in the State of Texas offers a variety of refinance loans depending on your situation, financial goals and current mortgage. Here are some programs we have to offer:
- Conventional Home Loans
- HARP Refinance Loan
- FHA Streamline Refinance
- FHA 203(k) Refinance
- USDA Rural Streamline Refinance
- VA Interest Rate Reduction Refinance Loan
It depends on your particular situation. Three major factors should be considered when deciding whether to pay points:
- How much you can afford to pay up front?
- How long do you expect to make payments on your mortgage?
- What is the length of your loan and how long do you plan to live in the home?
Many people looking for a long-term mortgage opt to pay points to ease the monthly payments over the long term of the loan. People looking at a mortgage with a shorter term or looking to stay in the home for a shorter period of time often opt to make a larger down payment instead of paying points.
You can refinance your home for a number of reasons, most of which typically result in a more favorable financial situation. Some of the benefits of refinancing include:
- Lower your monthly payments: By obtaining a lower interest rate, you may lower your monthly payment – keeping more money in your pocket. Refinancing can reduce your monthly payment initially, but that doesn’t always mean it will save you money in the long run. Fees and interest rates need to be considered when calculating if your new mortgage will save you money over the entire life of the loan. A licensed loan officer will be able to help you decide if refinancing is right for you. We’ll help you calculate at which point you will break even and begin to save.
- Shorten your loan term: Maybe you’re making more money now than you were when you first got your mortgage and can afford to put more money toward it. By shortening your loan term, you’ll pay off your mortgage sooner. Short term means you’ll pay less interest over the life of your loan. An example would be refinancing a 30-year mortgage into a 20-year or 15-year mortgage.
REFINANCE EXAMPLE:
| 30 YEAR FIXED | 15 YEAR FIXED | |
|---|---|---|
| % Down | 20% | 20% |
| Sample Closing Costs | $4,800.00 | $4,800.00 |
| Loan Amount | $200,000.00 | $200,000.00 |
| Sample Rate | 4.25% | 4.25% |
| Sample Loan APR | 4.450% | 4.604% |
| Est. Monthly Payment | $983.88 | $1,504.56 |
| Total Payments | $354,197.00 | $270,820.00 |
| Total Interest | $154,197.00 | $70,820.00 |
- The calculation above assumes annual amortization. This calculation is provided as an illustration to demonstrate potential savings. It is not intended to provide investment advice, nor is it a guarantee of applicability or accuracy in regard to your personalized circumstances. Not all borrowers will qualify for the rates listed above. This is not a loan approval. Estimated monthly payment does not include homeowners insurance or taxes. Actual payment will be higher. Annual Percentage Rate (APR) incorporates fees into a single rate so that it is possible to compare loans with different rates, fees or terms. Please seek advice from a licensed loan officer to see if refinancing may be right for you.
- Extend your loan term: Maybe you want a lower monthly payment and are willing to extend your mortgage out several years to get it. It’s important to understand that you’ll pay more over the long term in interest, but you’ll have a lower payment each month.
- Get cash out: As you pay on your mortgage, you build equity. Eventually, you can refinance through certain programs to get access to funds from that equity. These funds can be used in a variety of ways, such as paying bills, making a special purchase, improving or repairing your home or paying for college tuition.
- Stabilize an underwater mortgage: As a result of the 2008 financial crisis, many homeowners watched their home values plummet below the outstanding balance on their mortgages. With a HARP refinance, you can refinance an underwater mortgage and regain control.
- Copies of W-2s or tax returns for the previous 2 years
- If you own rental units, provide the most recent rental agreement and tax returns for previous 2 years
- Your last 3 bank statements along with the most recent statements for any mutual funds, IRA/401(k), or stock accounts
- Settlement agreement and divorce decree (if applicable).
- Non-U.S. citizens must present their Green Card or H-1 or L-1 visa.
- Recent paycheck stubs and proof of any other income, like tips, Social Security payments
- Your current mortgage note
These documents may not be all-inclusive, but by having these on hand, you will expedite the application.
Inspections are important to understand the condition of the home. They can also be helpful when it comes time to negotiate with the sellers, in terms of lowering the price of the home, or adding service stipulations to the contract.