Mortgage Refinancing - Avoiding Problems and Delays When Refinancing

If you are in the process of mortgage refinancing, any number of problems can delay closing on the new mortgage loan. There are steps you can take to ensure closing on time; unforeseen delays could result in your interest rate guarantee expiring and paying more fore the new mortgage. Here are several tips to make sure mortgage refinancing goes smoothly and that you do not overpay due to unforeseen delays.

Mortgage refinancing has become an extremely popular avenue for borrowing against your equity and reducing your monthly payment amount, despite rising interest rates. Even if you cannot qualify for a lower interest rate than you already have, you can still lower your monthly payment amount. Because you are required to pay fees when mortgage refinancing, it is important to shop around from a variety of mortgage lender and minimize your expenses.

If you've decided mortgage refinancing is right the right choice for you, start by collecting the necessary documentation for your new mortgage lender. You will be required to provide proof of income and assets in the form of pay stubs, bank statements, and tax returns going back at least two years. You will need a recent statement from your existing mortgage lender, the payoff balance of your mortgage, your homeowner's policy, and the most recent appraisal and survey of your home. Collecting all of these documents before applying for a new loan will eliminate 90% of the delays homeowners encounter during mortgage refinancing. You will want to stay in close communication with your loan representative in case additional information or documentation is required by the lender.

Mortgage Refinancing: Be Prepared to Pay Closing Costs and Points

Mortgage refinancing is just like applying for any other mortgage loan; you will be required to pay origination fees, possibly discount points, and closing costs to secure the loan. If you are unable to pay closing costs many lenders allow you the option of financing this expense with your mortgage; doing this will significantly increase your total finance costs and is usually not worth doing. You may also have the option of buying down your mortgage interest rate by paying discount points to the lender. Discount points are a fee you pay in exchange for more favorable terms or a lower interest rate. Before agreeing to pay points you should determine if the benefit you receive justifies the cost, and how long it will take you to recoup this expense from your potential savings. Having this information will allow you to make an informed decision if paying points is right for you.

Mortgage Refinancing: Watch out for Private Mortgage Insurance

If you plan on taking cash back from your equity when mortgage refinancing, be careful that you do not borrow more than 80% of your home's value. If you go over this 80% percent threshold, the lender may require you to purchase Private Mortgage Insurance and could delay your closing. This insurance does nothing to protect you and can increase your payment amount by hundreds of dollars. Private Mortgage Insurance only protects your lender from losses if you default on the loan; it would be in your best interest to avoid paying this expense.

You can learn more about your mortgage refinancing options, including costly mistakes to avoid by registering for a refinancing guidebook.

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