Loan Resources and Information.

Refinancing your mortgage simply means paying off an existing loan and replacing it with a brand new loan. Homeowners should consider refinancing only when there is a clear benefit to doing so, and this benefit outweighs the costs and potential risks associated with the refinancing process.

Reasons to Refinance and Eligibility

In general, homeowners may decide to refinance for any of the following reasons:

- A lower interest rate is available

- A different loan type or loan term is desired

- Cash from equity is desired

- The homeowner’s credit rating has improved

Although any of these is a good reason to consider a refinance, you should always look at the existing loan and talk to your lender prior to making an application for a refinance loan. The answers to these questions may further indicate the benefit of refinancing. For example, you should know how many years are left on the existing loan, how long you plan to live in the house, the costs associated with refinancing, and how much you will earn or save by refinancing over the life of the new loan. Your lender can also help you evaluate your overall eligibility based on your income, current property value, exist mortgage information, etc.

Refinancing Requirements and Costs

Because refinancing is essentially applying for a new loan, many of the refinance application requirements and costs will be similar to the first time you made a loan application. For example, you will need to disclose your credit information, current income and employer, cash reserves and bank accounts, title information, current mortgage information, etc.

Many of the same fees that you paid during loan closing for your original loan will be paid again when you refinance. These fees include application fee, title fees, appraisal fees, loan origination fees, and discount points and/or prepayment penalty fees.

Mortgage Products and Terms

Your overall purpose for the refinance will help you determine the correct loan product and terms for your needs. For example:

- If you want to reduce your monthly payment, and interest rates have dropped at least 0.5% or more, you may want to apply for a 30-year fixed loan at the new rate.

- If you have more disposable income, and you wish to increase the equity in your home, then switching from the 30-year term to a 15- or 20-year term may help you to achieve your goal.

Whatever your purpose or goal for refinancing, you should begin by consulting your current lender and then talking to a few others so you can compare loan packages (products, terms, rates, etc.). Be sure when you do that you request quotes on similar loan products, so you cam obtain an “apples-to-apples” comparison.

Ethics and Your Lender

After deciding on a lender, be sure that the lender acts in an ethical manner and makes all disclosures required by law. For example, within a few days of applying for the refinance, you should receive an Early Disclosure package that explains the loan you have applied for, the interest rate and loan term, the expected closing costs, and your rights as a borrower. You should also receive a copy of all signed closing documents.

If you do not receive these disclosures or your lender acts in an unethical manner (by asking you to sign blank documents, by attempting to influence appraisers or title company workers, etc.), you should stop the loan process immediately and report the lender to the appropriate state agency overseeing consumer lending practices.