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8 things to consider when refinancing with your current mortgage lender

Posted by  on Nov 29, 2010
 

Refinancing at current mortgage rates could potentially save you thousands of dollars over the life of your home loan. Shopping around to compare refinance rates can help you find the best deal. But refinancing with you current mortgage lender just might be the best solution. Here are 8 things to remember about refinancing with your current mortgage lender.

  1. There may be fewer hoops to jump through. Your current mortgage lender is already familiar with your payment history, so may be more inclined to approve a refinance even if your income or debt situation has changed.
  2. Be prepared to document income and other assets.Whether you are an old or new customer, your mortgage lender will want to know that you have the income to pay on a refinanced mortgage. Expect to provide recent pay stubs and tax returns. You may be asked to document investments or other savings accounts.
  3. You may be able to roll over money in your escrow account. More than likely you can use any insurance or property tax funds currently in your escrow account for the new loan. If you apply for a home refinance with a different mortgage lender, you may have to pay up to a year's worth of homeowners insurance premiums before the closing. You'd also need to show that you have a current flood insurance policy if necessary.
  4. Your current lender may act as the closing agent when you refinance. That means you may not need to spend money on an attorney or title company. Make sure you understand all the terms and conditions of your loan to make sure the deal is in your best interest.
  5. You must get an appraisal. Even though your mortgage lender is already financing your property, conditions in the real estate market have probably changed since you bought a home. Even if a real estate Web site has an estimate for your home's value, that may not be its appraised value. When the appraiser comes to your house, let him or her know about any major improvements to your home as well as recent home sales in the are that can help boost your value.
  6. You may be required to bring cash to closing. There could be a variety of reasons why you may need cash, including if you want to do a cash-in refinancing to raise the amount of your home equity to avoid mortgage insurance (MI). Mortgage lenders require that you have 20% equity in your home to avoid monthly MI payments.
  7. Your mortgage lender may waive certain closing fees to keep you as a customer. Carefully compare closing costs and other terms from several lenders to make sure you are getting the best deal.
  8. None of the above may apply if your loan has been sold. If, like most loans, yours has been sold and is not with the lender that originated it, you may have to go through the same process and pay the same fees as anyone else. Whether you refinance with your current lender or not, shop with several lenders to make sure that you are getting the best deal available.

While your current mortgage lender is under no obligation to refinance your mortgage, it's likely that it will do so it you have decent credit and have stayed current with payments on your loan.

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