All Your Mortgage Refinance Questions ANSWERED!

Posted by on April 13th, 2015 in Loans

What benefits are there to refinancing my current home?

When you refinance you are paying off your current lender and starting a new loan. What new loan you decide on will depend on what you are looking for. Do you want a lower rate and payment? Are you looking for a shorter term to pay it off quicker? Are you looking to get cash out of the equity? Are you looking to consolidate debt? We can discuss whether or not it is in your best interest to move forward based on these questions.

Do I need an appraisal? Do I have to pay for it? How much do they cost?

You will more than likely need an appraisal. It is very rare that one is not needed.  Yes, you will need to pay for it as it is a third party doing the inspection. The fees will range from $300.00 to $375.00 depending on which appraisal management company is randomly selected.

Can I order my own appraisal?

No. Lenders (not just Abri) in general will not allow for this. The appraisal will need to be ordered through a randomly selected appraisal management company and must be ordered through us.

Will I need money at closing?

This depends on many factors; the most important one is “loan to value ratio” or “LTV”. If your new loan amount does not exceed the threshold we agree to for rate/pricing or at the very maximum of 95% of the appraised value (non “cash – out” loans), and we can add the payoff of your current loan, closing costs and pre-paid expenses into that 95%, then no, you won’t need money at closing.

What is a cash-out loan?

A cash-out loan is basically when you refinance and get cash back at closing (over and above any payoff’s, costs, etc.). However, paying off any debt over and above your first mortgage is also considered “cash-out”. Your rate and “loan to value” requirements will change if you are doing one of these loans. It is best to call for details.

Why would I want to pay off debt in a “cash-out” refinance?

You would be turning multiple loans into one new loan/monthly payment whereas you can use the interest on those additional loans as a tax deduction now. Mortgage interest can be tax deductible.

 What interest rate will I get?

This depends as rates can change hourly. Also, rates can go up or down based on credit score, loan to value ratio and many other items related to risk on a loan. Whether you are ready to start the loan process or not, you can always check with us to see where rates are at for you.

What documents do I need to provide when I refinance?

We have a list on the website of documents you can expect to provide. Anything applicable to you and your situation will be needed. It is always best to provide everything you can.

Why is the payoff on my current loan higher than what my mortgage statement says I owe?

You will always need to add approximately one month of interest to your principal balance to pay the loan in full. When you make your monthly mortgage payments, you are paying your interest in arrears. For example, when you make your March 1st mortgage payment, you are paying your March principal payment and the month of February’s interest.

If I don’t make enough money to qualify for the loan amount I am interested in, do I have any other options?

You may. It is best to let us determine whether you qualify on your own or not. We may be able to help you find a way to do it. If not, you may need a non-occupying co-borrower. This must be a family member. Please call us for additional details should you have questions regarding this.

What happens if taxes or insurance is due within a certain amount of days of closing and my current lender hasn’t paid them yet?

You may be required to pay them at closing and get whatever your current lender has in escrow back after you close. This may not be applicable in all situations as you may pay them on your own or a payment has been sent and not recorded yet. In all instances it is best to discuss this with us.

What happens to my escrow account with my current lender?

A new escrow account must be set up when you refinance. If you currently have a mortgage with Abri, we can use your current escrow account to fund the new one (most if not all of the new one). However, if you have a different lender currently, we will need to set a new one up at closing, withhold this money from your loan proceeds and you then get a check from that lender within 30 days of them being paid off as a result of the refinance.

I heard I can skip a payment or two when I refinance. Is that true?

The true answer is yes and no. Yes, there is potential to physically skip two mortgage payments. However, you aren’t technically skipping anything. For example, if you close a loan in March and have NOT made your March mortgage payment, your new loan may have a first payment date of May 1st. In this instance, you will not have made a payment in March and April. However, the interest due for March was accounted for in the payoff of your loan (for February and every day until close for March interest) as well as your first payment in May paying your April interest due (interest paid in arrears). As you can see, you still are paying the interest on both loans without missing a day. It is just nice sometimes to not have to make the payment.

How much are the closing costs?

While they can change from time to time and it would be best to call for a quote, the common items you will pay for on a refinance are: Lender/underwriting fee, Appraisal, Credit Report, Title fees and Recording with your county. There may be additional costs if you have a second mortgage you need to subordinate or you have a condo association and there is a charge for the questionnaire.

Do I need an attorney or an agent like when I bought my home?

No. It is a much simpler process as well as less costly. While you are free to get an attorney to review documents for you, we are more than happy to explain everything to you and save you that fee.

Once I sign an application am I committed to the loan?

No. It is just an “application”. You can cancel at any time. The items there are no turning back from are: when you pay for your appraisal, it is nonrefundable and when you close your loan, it is final after the mandatory rescission period. (Rescission is mandatory on refinance transactions and mandates that there are three business days from the close of a loan before it becomes final and funds).

If I want to get started, what should I do?

Apply online by clicking on the Apply link and then Set Up New Account. Fill out everything to the best of your ability. Under appraised value, list what you think your home will appraise for based on the most recent sales within a half mile radius of your home. Once you submit your application, we will be notified and get right to work on your application. You can also call (815) 267-7700 or (866) 469-6228 toll free to apply by phone or set up an appointment to come in to a branch to apply.

If you don’t have time or the information you need to complete the online application, you may save it and go back to it by logging in under My Account. 

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