Home Equity Rate

Refinance is a pretty simple concept, right? You basically get your old mortgage loan paid off with a new mortgage loan, usually at a lower refinance interest rate and a lower mortgage payment. After all, as long as the monthly payment works, and you get a good rate, a refinance makes sense, correct? Many people refinance their mortgage for various reasons...they may just want a lower interest rate, they may want to take cash out of their property (called a cash-out refinance), or they may want to do both. These seem to be the 3 biggest reasons why someone would refinance their mortgage loan.

Sometimes, people even refinance their loan to get another party on the loan, off of it. There are even more reasons why some would refinance, but we won't go over that right now, as only YOU know why you are interested in refinancing. A refinance occurs when an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer, that is a broader definition of the term "refinance". A refinance also requires a brand new set of disclosures to the consumer.

When a person does a refinance on their mortgage, they often stay with the same type of loan program, just at better terms. But sometimes, a borrower will want to shorten the term of their mortgage, or even draw the term out, to make payments a little lower. These are also reasons that people may refinance. When you do refinance your current loan balance, it usually goes up a little bit. That is because EVERY refinance loan carries some closing costs. I won't outline every closing cost on here, but it IS a reality when you do a refinance, with any lender.

When you refinance your current mortgage loan, you must get your credit checked. A good credit score to refinance, is 620 or above (these days). People USED to be able to get a way refinancing with MUCH lower credit scores than that, but the lending markets have tightened up quite a bit. You also need to submit your income documentiation for the past two years, when applying for a refinance loan. No more going "stated" or "no doc". Full income documentation is required on every deal. The borrower also needs to have a DTI (debt to income ratio) lower than 55%, in order to refinance, with ANY lender. I personally try to have my clients pay off debt, IF they can, and get the DTI ratios down below 19%. It just helps to keep them safe :)

On a side note...if you want to refinance just to get a lower interest rate, you will always get a lower rate than if you refinance and take cash out of your property!

At this point in time (2009), refinance interest rates are VERY low, probably the lowest that they will ever get to. 5% these days on a rate and term refinance (that means no cash out), is very common these days.