Home Mortgage Refinancing Procedure: Review First Mortgage Documents

The Importance of Reviewing First Mortgage Materials

If you are thinking of refinancing your home loan, one of the first things you should do is review your current mortgage documents. Remember that much of your reason for refinancing rests in these documents. Either you are paying an interest rate that is much higher than the current rates, or you need some of the equity out of your home.

The Value of Your Home and Home Mortgage Refinancing

You may also find that your home has gone up in value. Even over a year’s time a home can increase dramatically based upon local improvements and other factors. It’s worthwhile to see your original home price again, and compare it to current sales of identical properties in your neighborhood.

An ARM Loan and Home Mortgage Refinancing

If you currently have an ARM and are thinking of refinancing, you will most definitely need to review your first mortgage documents to make sure you will be getting a better deal and can handle new payments. First, check your interest rate caps and compare to current rates of the loan product you are considering. It may be of no benefit—and actually could cost you more in the long run—to refinance. Always do the total interest payment math before you decide.

Debt Consolidation and Home Mortgage Refinancing

Make sure if you are using your refinancing to pay off a debt or consolidate a loan by getting cash back at the closing that you are not going to have an unmanageable increase in your payments. A larger loan after the refinancing happens to approximately 25% of borrowers, according to a report by the Federal Reserve.

Read All Home Mortgage Refinancing Loan Closing Documents ... Closely

It’s important, therefore, for the consumer to read all closing documents, get all fees and costs up front before applying for the loan, and for comparing the new documents to the old ones before it’s too late.

Pay Attention to Home Mortgage Refinancing Loan Prepayment Penalty Clauses

Another thing to watch for is the prepayment clause. Not knowing the length of time on your prepayment limit could cost you a lot of money. Never apply for a refinanced loan until you know you’re clear of this charge. On most loans, it’s five to seven years into the life of the loan.

Summary

Because requirements for loans vary from state to state, there may be additional concerns for your refinancing prospects. Make sure you know the risks, and have a lawyer review your old and new documents. Even if your mortgage company says they have a lawyer on staff, bring your own to the closing if you can—their lawyer works for them, so get one who works for you.