When is the right time to refinance?

What exactly is a Refinance?

Your lending institution is not like your credit card company...you can't call them up and renegotiate a better rate. You must satisfy one loan and start over. When you refinance, you are paying off your lender for the existing loan. At the same time, you are qualifying for a new loan to replace it, whether or not you stay with the same lender or choose a different one. So, a refinance is a new mortgage, but with a process with highly synchronized timing between old loan and new loan.

The Refinance Process

Refinancing your mortgage is not as complicated as buying a new home, but there are still protocols to follow and documents to submit.

BMC Keystone will work with you all the way. We'll shop the mortgage market for you to find you the best rates and terms. We'll line up a lender who is willing to work with YOU and get you pre-approved.

As part of the refinance process, more than likely, your property will undergo a home appraisal to determine its current value. This home appraisal is an important part of the refinance process for two reasons. It assures your lender that your home is worth at least the amount you plan to borrow. And, it gives an updated picture on the equity you have in your home.

Just like when you initially purchased your home, your refinance will have a settlement. Your title company will conduct final settlement for you to sign new loan documents.

How does a refinance save you money?

You can save money by moving to a loan with a lower interest rate which means lower monthly mortgage payments. If your original mortgage loan has an interest rate of over 3% and the rates have dropped, you could save money.

You can also save money long term by shortening the length of your loan.  By moving from a 30 year loan to a 20 year loan, more of your monthly payment will go towards paying off our balance instead of paying down interest.

Has your credit score improved? People with higher credit scores are eligible for the lowest mortgage interest rates. BMC Keystone can check your credit and if your latest scores bump you up to better rates, we'll show you how much you'll save.

Eliminate Mortgage Insurance

If you have an FHA loan and put less than 3.5% down, or a conventional loan with less than 20% down, you could be paying a couple hundred dollars in mortgage insurance every month! When you refinance, you have the opportunity to put more money down, or your appraised value you could put your equity over that required threshold. What would you do with all that extra money?

Consolidate Debt with a Refinance

Perhaps you want to pay off student loans, credit card debt, or both. A refinance loan gives you an opportunity to borrow money to pay off or pay down debt at a MUCH LOWER interest rate. No matter how mortgage interest rates fluctuate, they won't get anywhere near the rates charged by credit card companies which can be up to 25% or more.

Tap into Equity for Renovations

If you're ready to tackle some of the bigger projects around the home like windows or a new roof, don't wipe out your savings account. Considering a move to get more space or that dream kitchen? Don't move, refinance! You can borrow money against the equity you have in your home and use that money for renovations.

Remember as part of your refinance, your home will be appraised. This will help determine your equity.

Appraised Value of home - Balance you still owe = Your Equity

And when you have equity, even if that equity is a result of an increase in appraised value, that equity can be leveraged as collateral for your new new loan.

Does it make sense to refinance?

As with any loan type, calculating if it makes sense to refinance will depend on your original rate, the new rate, and your closing costs. We can determine how much money you would save overall and run down a list of any fees involved. Ideally, you want to save more than you spend!

How much does a refinance cost?

Yes, it costs money to refinance. Your closing costs will depend on your lender and the type of mortgage loan, but broadly speaking, your refinance will involve the following closing costs:

• Loan origination fee
• Appraisal fee, if required
• Lender's title insurance policy*
• Mortgage Recording fees

Note: A new lender title policy will be required since you are closing your current loan and opening a new one, even if you are using the same lender. If you have an owner's title policy from when you initially purchased the home, that policy remains in effect as long as you own the property. You only need to purchase a new lender policy for a refinance.