With the economic slump still hovering and mortgages going underwater, who would not dare try to obtain a refinancing these days? Added to this is the continued fall of mortgage rates to an all time low which is quite enticing to grab. They are talking here about very low rates that are unthinkable years back. And, if you consider the savings that these low rates can give, it will be quite substantial.
Juicy though these offers are, there is a catch however; obtaining a new loan or a refinancing these days is not as easy as way back then. Today it is more difficult to get approved for a loan. Lenders have altered their lending criteria and the borrower should have a very good credit to obtain the best rates. Way back then nearly anybody can obtain a fair rate. New fees are also being brought in to aid lenders cope with risks. For a borrower to avoid these new fees he or she must have a very high credit score. A 700 FICO score was a very good score back then, but now a borrower must have a score of 740 or even higher. So, if you are able to obtain the loan on a 700 score today, you will still be burdened with the new added fees.
If you belong to slow housing markets, you will have to tackle the problem of equity. Lower market value of your property can lower the amount of your equity; Lenders these days require bigger equity amounts before you can get approved for a loan or a refinance.
Although paying mortgage points is not an ideal thing way back, nowadays this can help you to get lower interest rates. Experts say that if you are planning to stay long in your home, the more ideal it would be to pay points.
There are also other costs that need to be paid. These costs are: loan preparation cost, underwriting cost, origination cost and appraisal cost, etc. These costs can also run to a few hundred dollars. If you consider these costs and add it to the closing cost of a new loan or refinance, this can add up to a considerable amount in fees. Borrowers must be wary of these costs when thinking of refinancing because it can sometimes offset the benefits of a lower rate.
It is essential to look into the advantages and disadvantages before you decide to refinance especially if you are uncertain of how long you will be staying in your home. Refinancing your mortgage with uncertainty of your future plans, could end you spending more than the savings you have figured out in refinancing. Just remember, that if you resort to refinancing, you will be just resetting the clock of your mortgage. This will be the scenario: your twenty years on your current mortgage can go back to 30 years if you decide on refinancing.
So, can you refinance your mortgage? Of course you can is the answer to the question; but, a lot of considerations must be taken into before deciding to go through it. Do not be gullible enough to fall for those all time low mortgage rates, because usually things that are too good to be true are not as attractive as they seemed when you are into it already.