freeandclear.com mortgage refinance guide

Download FREEandCLEAR.com Mortgage Refinance Guide

Post on 25-Jan-2017

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    Table of Contents

    Refinance Process ChecklistRefinance Process TimelineRefinance to Lower Your Interest RateRefinance to Reduce Your Mortgage TermRefinance to Convert Your Adjustable Rate Mortgage (ARM) into a Fixed Rate MortgageRefinance to Consolidate High-Cost Considering Total Interest Expense When Refinancing Your Mortgage to Consolidate High Cost DebtCash-Out Refinancing OverviewComparing a Cash-Out Refinancing to a Separate Financing for a Major PurchaseExample: Comparing a Cash-Out Refinancing to a Separate Financing for a Major PurchaseComparing Refinancing to a Home Equity LoanCombining mortgage refinancing with the FREEandCLEAR Mortgage Acceleration StrategyRefinance Lender OptionsMortgage Application (Form 1003) OverviewHow to Use the Loan Estimate (LE) in a RefinanceHow to Compare Refinancing Proposals and Pick the Right One for YouGet Pre-Approved for Your RefinancingUnderstanding No Cost RefinancingsWhat mortgage program is right for me?Mortgage Refinance Assistance Programs SummaryShould I Pay Discount Points to Lower My Interest Rate?Should I Lock My Refinancing?Settlement Agent Opens EscrowTitle Report and Title InsuranceAppraisal Report Overview

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    https://www.freeandclear.com/guides/refinance/order-title-report-also-known-as-title-search-or-abstract.html

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    Table of Contents

    How to Use the Closing Disclosure (CD)How to Compare the Closing Disclosure to the Loan EstimateReview Mortgage Documents During the Right of Rescission PeriodRecord Documents and Fund Refinancing

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    https://www.freeandclear.com/guides/refinance/order-title-report-also-known-as-title-search-or-abstract.html

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    You will likely have to provide extensive personal and financial documentation to refinance your mortgageThis is so the lender can verify your income and assets and evaluate your credit-worthinessThe documents requested may vary somewhat by lender but will likely include the items listed on the rightHaving these documents available and organized at the beginning of the refinancing process will make things go much smoother Reviewing your personal finances in advance of the refinancing process will help you identify and resolve potential issues such as missing documents or errors you may find This will help you avoid potential delays and ensure that your refinancing is processed as quickly as possibleThe lender will also order your credit report as part of the refinancing application processYou should review your credit score at the beginning of the refinancing process to make sure that there are no surprises when the lender does it

    Refinance Process Checklist

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    Refinance to Lower Your Interest Rate

    One of the most common reasons to refinance your mortgage is to lower your interest rate and monthly mortgage paymentA frequent question that borrowers ask is how much lower than my current interest rate does the new interest rate have to be for it to make sense for me to refinance?A good rule of thumb to follow when refinancing is that the new interest rate should be a minimum of .75% lower than your existing interest rate So if your current interest rate is 5.0%, the new interest rate should be 4.25% or lowerA reduction in interest rate of .75% or more allows you to reduce your monthly mortgage payment and typically recover your refinancing costs in 30 months or lessThe amount of time it takes you to recover your refinancing costs based on the amount of money you save on your new monthly mortgage payment is called the breakeven point When you refinance your mortgage you want the breakeven point to be 30 months or lessThe example below illustrates how refinancing your mortgage into a lower interest rate can save you money on your monthly mortgage payment For the example below we are holding the mortgage amount constant and assuming that the borrower pays closing costs but does not pay any discount pointsThe example demonstrates that by refinancing the borrower is able to reduce his or her monthly mortgage payment by $170 and recover the cost of refinancing in twelve monthsYou can also check out our FREEandCLEAR to learn whether it makes sense for you to refinance your mortgage

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    Refinance to Reduce Your Mortgage Term

    Another compelling reason to refinance is to reduce the term of your mortgageBy reducing the term of your mortgage you can potentially save a significant amount of money over the life of your mortgage, even if the refinanced interest rate is not significantly lower than the original interest rateAlthough shorter term mortgages have lower interest rates than longer term mortgages reducing the term of your mortgage may not result in a significant reduction in your monthly mortgage payment because the mortgage balance is amortized over a shorter period of timeBy reducing the term of your mortgage, however, you can lower your interest rate and significantly reduce the number of monthly payments you make over the life of the mortgage, which will likely save you tens of thousands of dollars in interest expense If you can reduce your mortgage term and your interest rate by refinancing that is doubly goodThe example below illustrates the benefits of refinancing your mortgage to reduce the term of your mortgage. In this case, the mortgage term is reduced from 30 to 25 years We show a .50% reduction in interest rate, less than the .75% reduction in interest rate that typically justifies refinancing a mortgage We show the borrower refinancing the original mortgage after five years The refinanced mortgage has a lower mortgage amount than the original mortgage, reflecting the pay-down of principal in the first five years of the original mortgage In order to properly compare the original mortgage to the refinanced mortgage, we add the interest expense incurred during the first five years of the original mortgage to the interest expense incurred during the 25 year term of the refinanced mortgage. The combined total interest represents the true cost of borrowing the $380,000 mortgage amount We also assume that the borrower pays closing costs but does not pay any discount pointsThe example demonstrates that by refinancing the borrower is able to save almost $30,000 in total interest expense over the life of the mortgage and reduce his or her monthly mortgage payment by almost $100 and recover the cost of refinancing in less than 20 monthsYou can also check out our FREEandCLEAR to analyze how ch