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Home Buyer's Recession Survival Guide - A Refinance Checklist

Updated on May 26, 2009

The official definition of Refinancing is as follows:

Paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral. In order to decide whether this is worthwhile, the savings in interest must be weighed against the fees associated with refinancing. The difficult part of this calculation is predicting how much the up-front money would be worth when the savings are received. Other reasons to refinance include reducing the term of a longer mortgage, or switching between a fixed-rate and an adjustable-rate mortgage. If there are prepayment fees attached to the existing mortgage, refinancing becomes less favorable because of the increased cost to the borrower at the time of the refinancing.

Refinancing can get to be habit forming, and there are some house owners out there changing Mortgages like they change socks. Refinance is a process which should be done sparingly and only when it is really necessary. Here is a checklist of some of the rational reasons why you should or should not refinance.

Don't refinance unless your new rate is at least .75% lower than your current one. There is no point incurring a whole bunch of charges and hassles and then not really having much difference in the payment or term.

Have a clear understanding of the closing costs before you get too far. The law states that closing costs must be disclosed within 3 days of the Mortgage application. It is wise to over-estimate the closing costs as you'd be surprised how many times those costs inflate past the initial estimates.

Get your Mortgage professional to give you all the details of the service plan and performance guarantee in writing. Otherwise you may end up experiencing the Refinance That Never Ends.

APR is supposed to stand for Annual Percentage Rate, but in some cases it's A Perfect Robbery. You really have to get the microscope out and read the fine print as most advertised APRs are under repayment conditions that are well out of the reach of most home owners. Most people will end up paying much more. Make sure you know the exact interest rate before you sign anything.

ARM is another messed up acronym. The original intent was Adjustable Rate Mortgage. It turned out to be pay up or we'll break your ARM. The line up of people who have lost their homes when the rates spiked would stretch across some states. A change of 2.5% in the rate can mean that the holder of a $250,000 mortgage would have to pay $500 more a month. That is simply not an option for many families.

Debt consolidation or major non-household purchases are common reasons to refinance and in the vast majority of cases they are really bad reasons. It is generally not wise to load down your house financing because you want to drive around in flashier wheels. You'd be far better off economizing, downgrading your vehicular fantasies (is that Hummer H2 really what you need to commute to work in traffic jams?), and chant your new mantra: "Leave the loan alone..."

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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