There has been much attention over mortgage refinancing in recent months. As many homeowners have failed to qualify for refinancing in the past, government efforts have been implemented to help alleviate the gap. However, refinancing can be tricky and the process isn’t always as easy as one would think.
Refinancing can be a great tool for lowering payments and helping stay out of mortgage debt, but there are costs associated. First, homeowners that are already in foreclosure or at risk are likely to be denied a refinancing offer. Even with the help of government programs most lenders simply cannot afford to refinance a home that is already in default. At this point, loan modification or short sales should be considered.
Homeowners should also know that refinancing offers are highly variable and not all are going to provide the same benefits. Shopping around for refinancing offers is the best way to ensure getting the best deal. The general rule of thumb is that refinancing should only be done if the interest rate on the loan can be lowered by a minimum of one percentage point or more. Similarly, refinancing can be good if refinancing from a variable or adjusting rate to a fixed interest rate.
Last, refinancing costs money. Most refinancing offers include a down payment and closing cost requirement that homeowners will be responsible for paying at the time the new loan is initiated. However, some lenders have been offering to lower or waive these fees in order to secure more refinancing applicants. As long as the fine print does not reveal hidden terms or fees, going with an offer to waive these fees can be a great deal.