Are you thinking about pursuing a Walnut Creek home refinance this winter? Refinancing is a complicated process with many factors to take into account, but it can help you lower your monthly mortgage payments significantly. Plus, winter is the perfect time to refinance because rates are often low and lenders waive many fees during the winter months. In this article, we’ll lay out the facts of refinancing, how to know if refinancing is right for you, and what to expect when closing costs.
Understanding Refinancing: How Does It Work?
When you pursue a Walnut Creek home refinance, you get a new mortgage to pay off your existing one. Refinancing works just like getting a mortgage to buy a house; it’s not an additional loan or debt that adds on top of the first one. The process typically takes three months and involves several steps:
- Initial application (and appraisal)
- Underwriting (approval)
- Final application (and appraisal, if needed)
You can choose to lower your monthly mortgage payments by decreasing your interest rate or increasing your loan term. Refinancing can also lower overall interest rates by decreasing your rate and extending the term.
Refinancing can also help you get out of an adjustable-rate mortgage (ARM) or a balloon loan, where interest rates are lower at first but rise over time. With refinancing, you may be able to switch from an ARM with higher initial payments to a fixed-rate mortgage that’s more stable and predictable over the long-term. Translation: you save money.
When Is Refinancing Right For You?
Refinancing usually makes sense when it reduces your monthly payment by at least 15-20%. This can be a big deal if you struggle to make your monthly payments or have little cash flow. In some cases, refinancing doesn’t help at all and may even cost more – so it’s important to run the numbers first.
Before Refinancing, Consider…
One of the biggest drawbacks to refinancing is closing costs, which include origination fees, appraisal fees, title insurance fees and credit report fee. These typically total between $500-$1500 per loan based on current market conditions. In comparison, a typical origination fee on a new loan is about $300 and you can expect to pay between 0.25%-0.75% of the total loan amount in closing fees for an average cost around $2500-$3000.
Keep these costs in mind when evaluating refinancing. For example, if you’re trying to save $100 per month on your mortgage but closing costs are $2000, then you’ll need to stay with that original loan for at least four years before the benefits of lowering your monthly payments outweigh the cost of paying for them in fees.
Work With an Expert To Get the Best Rate
If you’re curious about home refinance, reach out to Karen Douglas at The Mortgage Genie. She has the experience you need in a broker to help with your Walnut Creek home mortgage. Contact her today by calling 925 648 0981, or send a quick email just by clicking this link.