If you’re looking to refinance your home, you’re likely going to benefit from lower mortgage payments. But lower mortgage payments aren’t the whole story with a refinance. A refinance plan may change several key terms of your mortgage agreement – which may work for or against you.
Before you refinance, you’ll want to ask your lender these five key questions – it’ll help you ensure you’re getting a deal you can afford.
How Long Does It Take To Close?
Closing a refinance isn’t always straightforward, and in some cases it can take some time before your refinance is approved. For instance, your lender may want to assess your home’s value prior to issuing the refinance. In such a case, you’ll need to have a new home appraisal – which can extend the timeframe for closing.
What Are The Closing Costs?
Even though you’re refinancing, when it comes to closing costs, your lender will treat your refinance like a new mortgage. Oftentimes, closing costs will run between two and five percent of the purchase price, and will include title insurance, lender fees, appraisal fees, origination fees, and more. Before you refinance your home, ask your lender for a full list of your estimated closing costs.
Are There Any Additional Fees On Top Of Closing Costs?
Lenders often vary with respect to what fees they include in closing costs. You might need to pay for a property survey, land transfer tax, or insurance – and sometimes, not all of these fees are included in your closing estimate. You’ll want to ask your lender exactly what is included in closing costs and what additional fees you’ll need to pay.
Can I Prepay Without Penalty?
If you want to pay off your mortgage early, this could very well be the most important question you ask your lender upon refinancing. Some lenders will charge you a penalty fee if you make payments ahead of schedule. If you’re refinancing in order to get a lower interest rate and pay your mortgage off sooner, you’ll want to ensure that prepaying won’t lead you to incur penalties.
Can I Lock In My Rate?
Mortgage rates are low right now, but they’re likely to start going back up next year. So if you want to ensure you get a great deal, you’ll want to try to lock into a low rate now. Ask your lender if you can lock in your refinancing rate – it could save you a great deal of money in the future.