refinance

How to refinance your mortgage

 

 

Remember the first time you signed a mortgage? All the finance people, the big conference table. Let's not even mention the huge stack of papers that needed to be signed. I squeezed a tennis ball for weeks just to get in shape!

OK, so now you are thinking of refinancing? Here's what you need to know.

  • What is your current loan?
  • How much is your house worth?
  • Do you have equity in your house?

For the details of your current loan, you'll need to dig up the original loan documents or find your most recent statement and call your lender. If you have the statement handy and are the curious type, Bankrate has an amortization calculator that can tell you what your payoff amount is.

When looking at your current loan, there are two keys: the payoff amount and the interest rate.

Next, what's your house worth? Good question. The surest way is to ask a local Realtor for sales figures from comparable houses. Depending on where you live, that information might also be available online.

With your loan details and an idea of how much your house is worth you can now determine the amount of equity you've built up. Equity is the home's current value, minus what you owe. Don't forget to include any second mortgages or home equity lines in your equation.

Insider Tip:

Keep in mind that if you have less than 20 percent equity in your home you will be required to obtain private mortgage insurance, or PMI. PMI is estimated at 0.5 percent of your loan balance each year. Monthly PMI is calculated by multiplying your starting loan balance by 0.005 and dividing by 12. When the equity in your home exceeds the percentage required for PMI, your PMI payment drops to zero.

So, what is your current loan balance, how much is your house worth and lastly do you have any equity? Answer these three questions, and you are ready to go forward. Oh, and don't forget about the training.

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