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Re-Financing Tips - Refinancing can be a good idea for homeowners who:

Want to get out of a high interest rate loan to take advantage of lower rates. This is a good idea only if you intend to stay in the house long enough to make the additional fees worthwhile.

Want an adjustable rate mortgage (ARM) with a fixed-rate loan in order to ensure exactly what the mortgage payment will be for the life of the loan.

Want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have.

Want to build up equity more quickly by converting to a loan with a shorter term.

Want to draw on the equity built up in their house to get cash for a major purchase or for their children's education.

How much money do I need to re-finance a loan?

Lenders usually expect that you have at least five percent equity in the house's appraised value. Also, you can expect to pay closing costs, which are often three to four percent of the loan amount. If you retain five to twenty percent equity in your home, the lender will require you to pay for private mortgage insurance.
You may finance the closing costs into the loan amount to avoid paying cash to obtain the loan, as long as the total loan amount complies with the lenders equity requirements.

Why do I Need an Appraisal?

Mortgage companies require a formal real estate appraisal when you purchase a new home. Although you are not obligated to get an appraisal when you are selling, it is wise to have your property appraised by an unbiased third-party so that you may use this information to establish your asking price. In addition to buying and selling real estate properties, appraisals are necessary in many other circumstances, including re-financing, if you wish to have PMI removed, for the purposes of estate planning, and as essential documentation for bankruptcy proceedings and divorce settlements.

Smart Tips:

Avoid mortgage insurance
When you borrow more than 80% of your home's value, mortgage insurance is required. If you can reduce your loan amount by only $10,000 you will eliminate this fee.

Don't pay for a 30 year fixed if you don't need it.
Most homeowners sell or refinance their home in 5 to 7 years. Get a mortgage with a 5 or 7 year fixed period to lock in a lower rate for the entire period you plan to keep your loan.

Prepayment penalties lower your rate with little risk.
Rates are at historic lows. Going to keep your loan for the next few years? Get a lower rate & pay no penalties if you sell your home after the 1st year or keep your loan for 3 years.