Refinancing Your Mortgage
Record low interest rates may have you thinking about refinancing your existing mortgage. While the current rates are attractive, the decision to refinance your mortgage will depend upon on many factors and require some advance preparation to help you make the best choice for you.
Closing costs and fees
Refinancing involves paying closing costs because you’re obtaining a new loan. As a result, you will have to pay many of the same fees you paid when you purchased the home. However, if you have sufficient equity in your home, you may able to roll a large portion of the closing costs into the new loan. In addition, NWFCU requires an application fee of $462.50 in order to cover the costs of the real estate appraisal on your home, credit report, flood certification and underwriting fee. These fees are not refundable. Use our online calculators to help determine your monthly payment, loan options, and closing cost fees.
Crunching the Numbers
To determine if refinancing is the best decision for you in the long run, you’ll need to find your “break-even” point. You should ask yourself this question: Will I be living in the home long enough to recoup the cost of the refinance? For example, if the lower mortgage interest rate saves you $200 a month and you paid $4,000 in closing costs, you would have to stay in the house 20 months to save money or “break even.” In this scenario, if you are certain you’ll be in the home beyond 20 months, then refinancing might make sense for you.
Property Values and Equity
The existing value of your home is an important consideration in your refinance plans. Once you apply to refinance your mortgage loan, an appraisal will be ordered to determine the current market value of your home. In order to be eligible to refinance, you must have sufficient equity in your property. Equity is the difference between what your property is worth and the amount you owe on the existing mortgage. The amount of equity required to refinance varies. Whether your property is deemed to be in a declining market, will also be a factor in determining how much you can borrow. Keep in mind, private mortgage insurance (PMI) is required on all loans which exceed 80% of the property’s value. Determining your home’s value and more importantly your equity in the property will play a big part in your refinance decision.
High-Balance Loans
The Housing and Economic Recover Act of 2008 (HERA), established a “high-cost” area loan limit for High-Balance loans. High-Balance loan limits are between $417,000 and $729,750 and NWFCU will begin offering these loans January 2, 2009. The maximum loan amount is determined by the county in which the property is located. NWFCU will not be able to accommodate any loan amounts above the High-Balance loan limit of $729,750.
We Work for You
When making the decision to refinance, carefully consider all your options and the costs involved. We encourage you to use our online tools such as payment calculators, disclosures and good faith estimates to aid in the decision making process. Please be aware we are currently experiencing a high volume of applications and we thank you for your patience.
Remember, as salaried employees we work for you, not our next commission check.
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