Our answers to your most important questions about mortgage refinancing

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A bumper crop of record low interest rates has led to a boom in Mortgage refinancing. Perhaps you took advantage of this, or perhaps you have thought about it and are feeling confused or overwhelmed by the process. Here are some basic mortgage refinancing questions from social media and other sources, as well as some answers to specific questions from our readers.

Why should I refinance my mortgage?

The two main reasons for refinancing are to save money by changing the interest rate and / or the term of your mortgage, or to use your home equity through a down payment loan. Interest rates have never been this low, so anyone who took out a mortgage before 2020 could potentially get a lower interest rate.

A change in interest rates usually means you pay less interest, which can save you money over the life of the loan and lower your monthly payments. A change in term means a change in the term of your loan. A shortening of the repayment period can mean higher monthly payments (but if it is combined with a lower interest rate, the payments can stay the same or even decrease). An extension of the term usually means lower monthly payments, but more interest overall.

A cash out refinance is a way for homeowners to take advantage of the equity they have built up in their home. If real estate prices in your neighborhood have increased since you first bought a home, you have more equity. You can use it to take out a mortgage with a larger principal balance and then use the proceeds as a low-interest loan to fund home repairs or other large purchases.

What is important when it comes to refinancing?

Refinancing can be a lengthy and sometimes frustrating process, but it’s usually worth it if you can see savings within 18 to 24 months of closing your new loan.

When considering refinancing, you should check with at least three different lenders for new mortgage offers and make sure you understand all of the terms and fees. There are closing costs for a new mortgage as well as other fees such as an assessment and application fee. Bankrate has a calculator this can help you decide whether refinancing is worthwhile.

cash Bankrate Guide for more details on the process.

@parisrobbins_: How can you refinance an apartment building?

It depends.

An apartment building with up to four units can still be considered for a conventional mortgage. The monetary limits for a compliant multi-family loan are higher than for a single-family home.

If the building you’re trying to refinance has more than four units, you may need to speak to a commercial lender instead.

Remember, in the face of COVID-related financial uncertainty, lenders have been stricter on taking out new loans. Some banks may not offer refinancing on multi-family or investment properties, so it is best to check with your current lender and be ready to look around if you are looking to refinance. A Mortgage broker can maybe help you too.

Also take a look at Bankrate’s Guide to Refinancing Apartment Buildings.

@ Donnyv2345: How do you use your home to refinance student loans?

This is something you can do, but most experts do advise against it.

If you refinance your student loan and mortgage together into one new loan, you lose many of the special protections that federal student loans come with, such as income-based repayment plans and the ability to be granted loans if you work in certain professions.

While it is true that mortgage rates are currently low, student loan interest rates are usually quite low, and most borrowers will find it worthwhile to forego the benefits that student loans can offer. Also, if you have trouble paying in the future, you could lose your home.

Federally funded student loans are on hold until the end of the year, which means they won’t accrue interest and you won’t have to make any payments until 2021. If you are concerned about making payments when the grace period ends, get in touch with your credit service provider and discuss your options.

President-elect Biden has also proposed a waiver on many student loans, and you would also lose access to that program if you refinance your student debt into your mortgage.

@ family.fitness.money: Because of the surcharge, I have to register until 1.12. waited?

No.

the Refinancing fee from the Federal Housing Agency They went into effect on December 1, as planned, and that has made most mortgage refinancing 0.5 percent more expensive than a few months ago.

However, mortgage rates are still near all-time lows and the fee is only a small cost compared to the average size of a mortgage plus the other fees associated with closing it. The new fee may take you a little longer after refinancing to break even and start saving, but it doesn’t make refinancing a bad option for most borrowers, especially if you can cut your interest rate significantly .

Also, keep in mind that most mortgage refinancing will be affected by this fee, but not all. It only applies to mortgages likely to be sold to Fannie Mae or Freddie Mac, and that means no fee will be charged to jumbo borrowers. Some federally supported loans are exempt, as are compliant mortgages less than $ 125,000. And if you’re borrowing from a portfolio lender who keeps your mortgage on their books, you shouldn’t have to pay the fee either.

Steve Aavang: Why is there a rule that you can’t refinance if you own more than 12 properties? I mean, would it be a better risk to someone with 15 properties worth $ 100,000 ($ 1,500,000) each or one with 2 properties worth $ 1,000,000 ($ 2,000,000) each lend … or why is any number important at all?

I am not a legislator so I cannot say exactly why this threshold was set, but the general principle seems to be that at some point, if you have enough real estate, you will be a commercial property owner or real estate investor rather than just a homeowner with a few houses .

Once you have enough real estate in your portfolio, lenders and regulators treat it as business rather than personal wealth. This means that you have to finance this real estate through commercial lenders, who have different rules and credit terms and conditions than private banks.

As with the multi-family issue before, some lenders may be reluctant to extend new loans to real estate investors in the current uncertain financial climate. If you’re having trouble refinancing, you may have to shop more or wait for lenders to ease their purses again.

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