Timing a Refinance Loan
How do federal legislations mandate how mortgage companies
extend credit considerations to consumers?
Generally, the majority of home purchases entail a
"federally related mortgage loan." In other
words, the federal Real Estate Settlement Procedures
Act (RESPA) applies to the mortgage transaction.
The Department of Housing and Urban Development (HUD)
has devised a settlement sheet. While RESPA does not
set specific prices for services rendered during the
mortgage process, the standardized settlement sheet
is designed to outline the fees and charges associated
with processing a loan and its closing costs.
Americans should pay close attention to the annual
percentage rate (APR). The APR represents the interest
rate on the loan. It is calculated by counting the interest
to be paid coupled with any other fees that are added
into the mix, i.e. points and administrative costs.
More relevantly, when a consumer makes a mortgage loan
decision, it is important to compare APRs from a variety
of lenders for both new homes purchases and refinanced
What is the rule of thumb when a homeowner is considering
refinancing their mortgage? The basic rule of refinancing
is to make sure that a homeowner’s property is
worth ten percent more than the loan amount. For example,
if your home is worth $375,000 and you have already
paid $38,000 on the home, refinancing is ideal. Moreover,
for the home owner who purchases private mortgage insurance
(PMI), they may be able to get by with only five percent.
In summation, refinancing does not always warrant a
substantial savings. As the monthly savings can enhance
a consumer’s overall bottom-line, starting over
on a home loan measures up to paying more in interest
than the consumer would otherwise have paid in their
loan. Particularly, it is true for the home owner show
have been paying their loan for several on your loan
for quite a few years.