14
Apr
By First Rate Financial Group
Mortgage

Common Fees During Refinancing

Common Fees During RefinancingAs interest rates fluctuate, you might think about refinancing your mortgage. This is the cost of taking out a new home loan to replace the one you currently have. If you get a significantly lower interest rate, you could save tens of thousands of dollars over the life of the mortgage. On the other hand, you need to think about potential expenses you might incur during the refinancing process. Because you are taking out another home loan, you may need to pay closing costs a second time. What are some of the most common expenses you might have to pay?

The Mortgage Application Fee

One of the most common expenses is the mortgage application fee. Essentially, this is a fee that the lender will charge for opening up a new application on your behalf. The fee can vary significantly depending on the lender you use, but it is usually a few hundred dollars.

A Home Appraisal

When you took out your first mortgage, the lender probably required you to get your home appraised. The lender wants to make sure they are not financing a home that is not worth as much as its price tag. You still need to get your home appraised again if you decide to refinance your mortgage. The lender wants to make sure they understand how much the house is worth before they give you a loan for it. A typical home appraisal is also a few hundred dollars.

Title Search And Title Insurance

The lender might also require a title search and title insurance. This is important for making sure you protect yourself in the event someone else still holds the title to your house. A title search is usually a few hundred dollars, and title insurance could be $1,000 or more.

Loan Origination Fee

Most lenders charge a loan origination fee that is approximately one percent of the value of the loan. Again, this can vary from lender to lender as well. 

Understand These Fees

There are lots of potential fees that a lender might tack on. Fortunately, you do not necessarily need to pay for all of them. Always ask the lender whether they might be willing to waive some of these fees to make the cost less expensive. 

 

13
Apr
By First Rate Financial Group
Mortgage

Taxes And A Cash-Out Refinance: What To Know

Taxes And A Cash-Out Refinance: What To KnowIf you decide to go through the refinancing process, there are several options available. One of the most popular options is a cash-out refinance. Essentially, you capitalize on the difference between current interest rates and the interest rate on your home loan to keep your payments the same while also drawing equity out of your home in the form of cash. You can use this money to fund your retirement, complete home repairs, or do a renovation project. Even though you can do just about anything you want with this cash, what do you need to know about a cash-out refinance and taxes?

You Do Not Have To Pay Taxes On Your Cash-Out Refinance

You don’t have to pay taxes on the cash stemming from a cash-out refinance. The IRS generally looks at this money as a loan that you will be expected to pay back. Therefore, you don’t have to report it on your taxes. On the other hand, there are other implications you need to know.

The Interest On Your Mortgage Is Tax-Deductible

One of the biggest tax deductions you might claim is the interest on your mortgage. If you want to claim your mortgage interest as a tax deduction, you will need to itemize your deductions on Schedule A. Furthermore, there is a limit to the amount of mortgage interest you can claim on your tax forms. If you have questions about how to handle your mortgage interest on your taxes, you should talk to a tax professional or an attorney who can help you. 

Consider Setting Up A Home Office

You might even want to use the money from your cash-out refinance to build a home office. If you are self-employed and working from home, you might be able to deduct the expenses related to your home office. Again, you need to be familiar with the requirements related to your home office if you want to claim this deduction. A tax professional can help you.

Be Aware Of The Implications Of Refinancing And Taxes

These are a few of the most important points you should keep in mind regarding taxes and the refinancing process. Reach out to a tax professional with any questions. 

 

07
Apr
By First Rate Financial Group
Mortgage

How To Qualify for Refinancing a House

How To Qualify for Refinancing a HouseIf you want to save money on your mortgage, now might be a great time to refinance. When you refinance your home loan, you replace the existing mortgage with a different one. You can refinance your home to withdraw cash, shorten the term of the loan, or reduce your interest rate. Not everyone can refinance the house, so take a look at a few key rules you need to follow to qualify for a refinance.

Have A Mortgage In Solid Standing

First, your mortgage must be in solid standing with your lender. If you are behind on your mortgage payments, the lender might not let you refinance. Try to stay on top of your monthly mortgage payments. As long as you haven’t owed any late fees or missed any payments entirely, your lender should consider letting you refinance your existing home loan.

Have Enough Equity In Your Home

You also need to have enough equity in your home. A lot of first time homebuyers my only put 3.5 percent down on their house. Even though this makes buying a house more affordable, it does not necessarily mean there’s enough equity for a refinance. If you have 20 percent equity or more in your home, your lender might allow you to refinance. Every lender is different, so be sure to talk to a loan officer about their specific requirements.

Have A High Credit Score

When you go through the refinance process, you are applying for another home loan. Therefore, the traditional rules will still apply. Your credit score must be high enough to qualify for a refinance. You can improve your credit score by collecting and accuracies on your credit report, paying your bills on time, and controlling your debt to income ratio. If you have a solid credit score, your lender should allow you to go through the refinancing process. Remember that you can check your credit score for free once per year.

Refinance And Save Money

These are the basic rules you need to follow if you want to refinance your home loan. Refinancing your home loan can help you save tens of thousands of dollars over the life of your loan. You might even pay off your mortgage more quickly.