Refinancing A Home
There are many reasons someone may choose to refinance a loan, but the main reasons would be to:
- Lower monthly payment
- Reduce interest rate
- Pay off mortgage sooner
- Convert loan (i.e. turn an adjust rate loan into a fixed rate loan)
- Pay for major purchase or expense
At Academy mortgage, we work to understand your reason for inquiring about refinancing your home loan and will review the information, analyze the numbers and make recommendations for the smartest path to achieve your goals. Sometimes, refinancing may not the ideal solution for your situation and in situations like that we will provide guidance on a more beneficial route based on your needs.
If the refinance looks like the best option for you and your needs, then we will work with you through the entire process to complete your home loan refinancing.
Most Common Loans
The most popular types of loans when refinancing:
- Fixed Rate Mortgage
- Adjustable Rate Mortgage
- FHA Mortgage
- VA Mortgage
- Jumbo Financing
Things to Know
- Many lenders will refinance for even the smallest of gains in rate. Be sure that you know the costs of doing business and then divide the monthly savings into that number. If you find that it will take much longer than 24 months to recoup this expense, you probably should NOT refinance.
- Many people get in a financial pinch and refinance to consolidate other debt. Keep in mind that the perceived savings is usually due to taking a short term debt and converting it to a 30 year term. However, this erodes your equity and may make it harder to sell your home later, or greatly reduce what you take away from a future sale. So this idea should be your last resort.
- Some folks also refinance to take cash out, in order to supplement their income. This is usually a sign that you are living beyond your means, and selling the home to downsize may be a better option.
- Lastly, be careful in using adjustable rate mortgages (ARM) for refinancing. If you are fairly certain that your will be leaving the home in a few years, then get an ARM with an initial fixed period that will cover you for that time, plus an additional couple of years. People’s lives change and rates can rise substantially over time. So you may not be able to refinance again when the fixed period is up. If you overstay the fixed period, you may also find a nasty surprise increase in your payment that makes budgeting difficult or impossible!
How to Prepare
- Your lender will need to document your income, assets, liabilities, and be able to confirm your identity. Here is a generic list of items to bring with you to meet with a lender
- Copies of your last two years of federal tax returns, with all the pages and schedules. Be sure that includes and W-2’s, 1099s, and/or K-1s, as may be applicable. If you own a business, be sure to bring the last two years of business tax returns as well!
- Bring copies of the last two months’ worth of bank statements – checking, savings, investment accounts, IRAs, 401Ks and the like. Be sure to include EVERY page! If the statement says page 1 of 6, you lender will want to see all 6 pages , in other words
- Don’t forget to bring a photo ID with you. Some lenders require a second form of ID as well. However, all lenders will need at least one of those IDs to have your picture. So a driver’s license or passport are the most common
- If you have had any life events like a marriage, sale of another home, divorce, bankruptcy, judgment, tax lien or collection, etc. – then be sure to bring copies of those documents with you. I recommend you bring the whole file and let the lender sort out what they will need.
- If you are refinancing, then it would also be a good idea to bring contact information for your insurance agent and/or HOA management company, as may apply!