House Refinance Center
How To Refinance A Mortgage
Lock In Your Rate: Refinance Now

The rate that you are quoted when you are shopping for a mortgage might be entirely different
when you go to settlement.

A rate-lock, or lock-in, is a commitment by the lender to guarantee and hold a specific rate for a
specific time period. You may lock in the rate when you make the loan application, during
processing of the application or after your loan is approved. The rate lock-in protects you from
rising mortgage rates before the deal closes. However, what happens if the rates fall? Will you
get the lower rate? And if you get the lower rate? Is this considered a new rate lock, and do you
have to pay again? To avoid any disappointment, you need to have these questions addressed.

Your lender might have a maximum time the lock-in rate is good for. For example, if your
lender's policy is to hold a rate-lock for 60 days, you have to decide if thr deal can be closed in
that time period. Remember, you are paying for this option. Usually it would cost you one point,
which is 1% of the loan amount. So it isn't cheap.

We would suggest locking the rate when you apply for the mortgage. You then have to do your
part in getting the deal closed on time. Gather all your documents, and be ready to present them
to the lender when he asks for them. Many lenders use a checklist that shows all the documents
that are required, and the terms and conditions that have to be met. As you satisfy a condition or
provide a document, those items are crossed off the checklist. Always ask your lender to fax or
email you an updated checklist. This is your proof that the lender has received the information.
When all the items are crossed off, the file is complete.

Some areas that are of concern and cause the file to be delayed at closing are appraisals,
employment letters, and the settlement fees.

Appraisal

When a full appraisal is required, the appraiser makes an appointment to visit the house. He
takes several pictures, inside and outside, of the house. He then has to be paid. Cash is
preferred so you should be prepared. Have someone at home and leave the cash. With cash
you won't have to wait until a check clears your bank. This solves a major problem. An appraiser
will not release the appraisal report until he is paid in full.  You won't have to wait until a check
clears the bank.

Employment letters

Employment letters can cause some major delays. If your lender wants to verbally verify your
employment, he will need to speak to the person who signed the employment letter. It might be
difficult reaching the individual on the phone.  The person might be in a meeting, away on a
business trip, or possibly on vacation. If you know that your supervisor will be away from the
office, let the lender know immediately. Some workers set aside a couple hours a day to return
phone calls. Let your boss know that the lender will be calling, and let your lender know  the best
time to call your boss. Anything that you can do to speed up the process, go ahead and do it.

Settlement fees

Finally, the settlement fees can delay your closing when you are paying out-of-pocket. Ask the
lawyer, or settlement officer,  to send you an invoice by fax or email. Confirm how he wants to be
paid. Some prefer a regular check, others insist on certified funds.

The reason you want to close on time is that if you close after the lock-in period expires, the
lender might not honor the lock-in rate. You might end up paying a higher rate, and that is wasted
money. Usually, the lender doesn't have a choice. Mortgages are packaged and sold on the
secondary market, and the lender might not be able to sell your loan at the old rate.

The lender charges a fee for holding the rate. To get the terms you must close by a certain date.
Lock-ins for 30 days are common, although some lender will offer as little as 7 days, while other
lenders give  up to 120 days. The more time you have, the more you have to pay. The lock-in
period should be long enough to allow for the processing of the application and the settlement.
Before you sign for the lock-in, ask the lender for an estimate of the time it would take to close
your particular loan. Refinances are generally done within 30 days, so you do not want to pay for
a 90 day lock-in.

Get it in writing

Always get your lock-in agreement in writing. The loan commitment is not a lock-in. The
commitment promises to give you a loan, and it can contain a clause that mentions the lock-in.
However, the commitment is offered after the loan is approved. You want to get the rate lock-in
at the time of the application.

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When NOT To
Refinance Your
Mortgage

In a perfect world you would never have to
refinance your mortgage. But we are living in
troubled times. We have rising defaults and
foreclosures, and anxious lenders tightening their
underwriting guidelines.

Ideally, you should refinance your current mortgage
once, and once only. Multiple refinancing can
wipe-out your equity, and can increase costs.

A refinance does not eliminate your debt. It is just
a strategy for moving debt from one or more
boxes, and putting it in a different box.

If you are 12 years into a 25 year mortgage, you
should try all available options before you
refinance. And if you are facing retirement in the
next 5 years, try your best not to refinance. If you
do refinance in your golden year, put aside a
portion of the money to purchase an annuity. This
would give you a monthly cheque in your retirement.
Recasting Is A
Great Option

Recasting a mortgage is an option available to a
homeowner who might be distressed and having
problems making the payments. It is quicker than
the traditional refinance, and the lender generally
waives the fees.

Example:

The homeowner takes out a mortgage for
$100,000 with an interest rate of 5.5% and
amortization of 30 years (360 months).

About 7 years later, 84 payments later to be exact,
the homeowner is having money problem.

He goes and explains the situation to his lender.
The lender recommends a mortgage recast.

The mortgage balance after the 84 payments is
$87,175.17. So the lender sets this amount as the
new mortgage balance, keeps the existing
mortgage rate of 5.5%, and changes the
amortization back to 30 years (360 months).

The new payment, principal and interest is now
$494.97. This is $72.82 less than what the
homeowner was paying.

The important feature of the recast is the fact that
the equity is preserved. The almost $13,000 that
the homeowner built up is intact.
How And When To Refinance A
Mortgage

In the current mortgage market we hear lots of talk about refinancing. In fact, market from falling
off the cliff.

There are a few steps you should take to get the best deal if and when you do refinance.

Shop around
Your current lender is not the only option. Shop around to 3 or 4 different lenders. Shop around
to 3 or 4 different lenders. Test the waters. If you decide to stay with your current lender you will
be bringing some important information to the table. The fact that you have done your
homework, and can discuss terms, rates and various options, is enough to get you 0.50% off
the rate.

Know your break-even point.
All businesses have a break-even point. The money coming in versus the money going out.
(layman's terms). With your mortgage you have to use a similar approach. What is the cost of
refinancing versus how much is it saving me over a certain amount of months. Will it take 60
months to recoup your costs? Or will it take 120 months? The quicker you recover the costs the
better it is for you.

Establish the value of the house
Be aware of the difference between an Assessed Value and an Appraised Value. The
assessed value is the value that the tax assessor uses to determine how much taxes you have
to pay. The appraised value is the market value, or the value that a prudent person will pay for
your house.

If you are in doubt about the value of the house, pay for a professional report. This is money well
spent.
Refinance Your Mortgage: Know The Costs
Make sure that you are completely aware of all the costs and fees.
Pay attention to the points and closing fees. Watch the above video.
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