As interest rates drop to historic lows, several homeowners in Champaign, IL are making the decision to take advantage of refinancing their home. Keep in mind, even if your neighbor is refinancing, it might not be the right move for you. Below are some things you need to take into consideration before making your final decision regarding refinancing.

Although rates are low right now, the present economic crisis has caused a lot of lenders to reduce the amount of loans they give out.  This is a drastic change from the last few years when requirements were very loose and almost anyone was eligible for a mortgage. If you are figuring out how to save on your mortgage refinance, its vital to make sure you do your homework and get your facts right.

First, look at your loan-to-value ratio. In a no-cash-out refinancing (where the amount of your new loan doesn't exceed the balance of your existing loan, plus points and closing costs, if applicable), you may be able to borrow as much as 95% of your home's value. However, if the value of your home has fallen below the amount of your existing mortgage balance, you may not be able to refinance at all. This sadly, has been the case for many homes.  But you may be able to proceed through the American Recovery and Reinvestment Act of 2009's Home Affordable Refinance program.

The major advantage of refinancing to a new lower interest rate is that you will save a substantial amount on your monthly mortgage payment. This is of course why most people choose to refinance their mortgage. It is important to keep in mind however that there are going to be costs involved with refinancing such as closing costs, points, and possible appraisal  and attorney fees.

Do your research and shop around for the best refinancing interest rates. All banks are not created equal, some banks and financial institutions charge higher rates than others. Normally, the smaller Community Banks and Credit Unions are more consumers oriented and charge lower rates.

In addition, when shopping around, look and compare interest rates and points versus no points before you refinance. Look out for embedded points included in the closing costs. Keep in mind, some lenders will include points in the closing cost without necessarily actually quoting these costs as points.

As a homeowner, it is important you do your research and educate yourself -- reach out to a professional who can walk you through refinancing as it's not a one size fits all solution.   

Have questions? Contact me today for help understanding the entire refinancing process.

 

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