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.
What is a refinance?
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.
Can my lender sell my loan?
Is refinancing my mortgage the right decision for me?
How do I refinance my home?
What are my refinance program options?
Scion Lending, doing business in the State of New York as Scion Lending Financing, offers a variety of refinance loans depending on your situation, financial goals and current mortgage. Here are some programs we have to offer:
Pre-qualified or pre-approved — what’s the difference?
Pre-approval is more thorough than pre-qualification. To be pre-approved, you must submit an application and verify your credit and financial history. After you receive your pre-approval certificate, you’re in a stronger position to close earlier and negotiate a better price. It’s highly recommended that you seek pre-approval if you are shopping for a home.
What are the benefits of refinancing my mortgage?
- 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 |
Total Interest | $154,197.00 | $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.
- 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.
What documentation will I need to provide in order to get my loan or line of credit approved?
- 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.
What will be considered in the loan process?
- Proof of Income – Find and make copies of your pay stubs.
- Tax Information – Gather your W-2s, 1099s, and tax returns for the last 2 years. If you’re self-employed or an independent contractor, you’ll be required to provide your 1099-MISC information.
- Credit Details – We’ll perform a credit check when you apply.
- Debt Documentation – You’ll be required to provide documentation on your outstanding financial commitments. Gather materials on your current mortgage, car loans, student loans and any other debts.
What are points?
Should I pay points?
- How much you can afford to pay upfront?
- 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 their monthly payments. 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.
What’s a FICO score?
FICO and the credit bureaus do not disclose their exact computation methods. However, most credit scores are calculated through models that assign points to different factors of your credit history to best predict future performance. There are many commonly analyzed factors in your credit history, including:
- Payment history
- Employment history
- How long you have had credit
- How much credit you have used compared to how much you have available
- How long you’ve lived at your current residence
- Negative credit/financial events such as collections, bankruptcies, charge-offs, etc.
My credit scores are low. How can I raise them?
- Pay your bills on time. This is extremely important. Collections and late payments can lower your credit scores.
- Reduce your credit balances. Maxed out credit cards will lower your credit score.
- Don’t apply for credit often. This reflects poorly on you and your rating.
- Establish credit history.
What do I do if I want to make a large purchase before I complete settlement?
My credit report is wrong. Can I report errors?
Equifax: https://www.ai.equifax.com/CreditInvestigation/home.action
Experian: http://www.experian.com/rs/fi4.html
TransUnion:
TransUnion Disputes
2 Baldwin Place, P.O. BOX 1000
Chester, PA 19022
1-800-916-8800
http://www.transunion.com/corporate/personal/creditDisputes.page
What if a lender goes out of business?
What information is included in a credit report?
- dentifying information — Social Security number, date of birth, employment information (these facts are not determining factors in credit scoring)
- A list of debts — how many credit lines have been opened and closed, types of credit lines, a history of how you’ve paid them, loan limits, and current balances
- Public record information — bills referred to collection agencies, bankruptcies, foreclosures, suits, liens, etc.
- Inquiries made about your creditworthiness during the last two years — voluntary and involuntary inquiries.
What’s a rate lock?
Rate locks are dependent on the type of loan program, current interest rates, points, and the length of the lock. To hold a rate for longer periods of time, you usually have to agree to pay higher points or interest rates.
What’s private mortgage insurance (PMI)?
The price of PMI is inversely proportional to the size of your down payment. The larger your down payment, the lower the cost of PMI will be.
Why do homeowners refinance?
What do I do if I want to change jobs before I go to settlement?
Why do I need a home inspection?
Why do mortgage rates to go up and down?
Inflation also has a major impact on mortgage rates. Inflation is associated with a growing economy. As the economy grows, the prices for goods and services increase along with it. This price inflation affects real estate along with everything else, pushing up the price for mortgages.
Lastly, the Federal Reserve has the ability to influence interest rates for the purpose of controlling inflation and employment. It can do this by raising or lowering the discount rate, and indirectly influencing the direction of the Federal funds rate.
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