Refinance

Refinance Your Home

  • Stabilize your payments with a fixed-rate
  • Get cash out from your home's equity
  • Consolidate high-interest credit card debt
  • Pay only if the loan closes

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If you’re thinking about refinancing your current mortgage, the following are important to help make the refinance process go smoothly:

What Exactly is Refinancing?

Your current mortgage may turn out to be the lifetime commitment that it seemed to be when you were in the middle of your last closing. But because interest rates change constantly, what may have seemed like a good rate when you first purchased your home may be much higher than today's rates. If you choose to refinance to take advantage of the new rates, you will have to take out a new mortgage with a lower rate or more favorable terms, and use it to pay off your old loan.

You can pay off your loan faster or lower your monthly payments.

As a result, refinancing could save you a substantial amount of money over the course of the loan and bring your housing expenses more in line with what other people are paying for their homes. This gives you the option of paying off your loan faster or lowering your monthly payments.

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Benefits of Refinancing

You may want to refinance your mortgage for several reasons. You could save money by paying off your mortgage faster or by lowering your monthly payments. You can build home equity faster, or use the new mortgage to consolidate debt, pay for home improvements or plan for future big expenses.

Get extra cash at closing

By refinancing more than the amount you currently owe on your loan, you may be able to receive additional cash at closing.

For example, if your home is worth $200,000, and you still owe $100,000 on your mortgage, you could refinance $120,000 and take out the extra $20,000 in cash. Your costs are still consolidated in one mortgage payment, but now you have the extra money to help pay for other expenses.

Lower your monthly payments

By locking in at a lower interest rate for the life of your home loan, you will benefit from a decreased monthly payment (and overall cost of the mortgage). Even a small dip in rates could save you a substantial amount of money each month.

For instance, if your current $150,000 mortgage was settled at 6.5%, and you refinanced at 4.25%, you would save nearly $210 a month.

Build up equity, pay off debt faster

If you shorten the term of your mortgage, you may increase your monthly payment amount. But in the long run, shorter terms will dramatically reduce your total housing costs and build up equity in your home faster.

Consider an original $200,000, 30-year term mortgage at a fixed interest rate of 4.25%. If you were to refinance by shortening the term to 20-years with no change in the interest rate, your monthly payment would go up, but you could potentially save thousands of dollars over the life of the loan.

Focus on short-term savings

If you are planning on staying in your home for just a few more years, you could switch from a Fixed Rate to an Adjustable Rate Mortgage (ARM) to achieve short-term savings. An ARM may initially provide a lower interest rate that may make your monthly payments smaller, providing you with immediate short-term gains.

For instance, if you were to refinance a $250,000 Fixed Rate Mortgage that has a term of 30 years at 4.25% with an ARM that has an initial interest rate of 3%, you could save nearly $176 a month.

Achieve long-term peace of mind

If your current adjustable-rate mortgage is causing you to worry about which direction the market will go, a fixed-rate mortgage may provide you with peace of mind and the potential to save money over the longterm.

For example, your $100,000 Fixed Rate Mortgage with a term of 6.25% will cost a total of $221,656.04 over the course of a 30 year loan, whereas a $100,000 ARM at 5.00% may cost $255,866.49. That is a savings of over $34,000 over the life of the loan.

Consolidate debt

You may want to include outstanding debt in your new mortgage—for example, by paying off your high APR credit cards. By consolidating these debts in the amount refinanced with your mortgage, you could make just one payment each month. Not only will you feel more organized and in control of your finances, but you may be able to save significantly on interest charges and late fees.

The average American household has $8,000 in credit card debt. If you were to consolidate this amount when refinancing, you could save hundreds of dollars in high credit card APRs.

Almost all of the reasons to refinance will put extra cash in your pocket, but the decision to refinance will depend on a few points about your financial situation and future plans.

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Should I Refinance?

Clearly, there are many benefits to refinancing, especially considering today's recordbreaking interest rates. But given your specific circumstances, will refinancing really save you money?

In most cases, it financially pays to refinance your mortgage if you can lower your interest rate, shorten the term of your loan, or keep the property (and the loan) long enough to recoup the costs of refinancing.

To figure out whether you will save money by refinancing, you should consider the three questions below.

1. What is my break-even point?

Any time you refinance a mortgage, there will be costs associated with the process. Even if you go with your current lender, you will need to pay for costs incurred by the appraiser, Title Company and closing agent. You need to itemize all the expenses involved in the refinance (including income taxes to be paid because of reduced interest deductions), estimate your new monthly payments, and compare it to what you are currently paying. Then you can figure out when you will break even.

For example, if you save $1,500 a year by refinancing, but it costs you $4,500 in taxes and fees, you will have to stay at your current home more than three years to realize any savings. If you are not planning on staying at your current home long enough to break even, then refinancing may not be right for you.

2. How much is already paid off on my current mortgage?

If you've been paying your present mortgage for a number of years, deciding whether or not to refinance is a little more complicated. You may have paid off a substantial part of the interest you owe on the original loan and have begun to chip away at the principal.

For instance, if you have 20 years of payments left on your original 30-year $200,000 loan, and can reduce the interest rate from 8.5% to a low rate of 4% by refinancing for another 30 years, you could still lose tens of thousands of dollars. When you refinance—which means you are taking a new loan—the bulk of your monthly payment once again goes toward the interest.

3. Will I benefit from a different type of mortgage?

You may also want to compare which type of loan is right for you compared to your current loan. You can arrange financing to switch from one Fixed Rate loan to another but at a lower rate, or from an Adjustable Rate loan to a Fixed Rate.

There are benefits for both.

For instance, if you refinanced a $200,000 Fixed Rate Mortgage with a term of 30 years at 6.25% to an ARM at 5.0%, you could save over $150 a month. However, over the 30 year term, the total payment of the Fixed Rate Mortgage is tens of thousands dollars less than that of the ARM. In the end it is the choice that you will have to make—do you want to save every month or would you like to save over the long run?

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How do I Refinance using TrueFi?

The refinancing process often sounds more complicated than it really is. With TrueFi’s online selfservice tool, refinancing your mortgage is extremely easy. TrueFi guides you step-by-step through the entire loan process from start to finish.

1. Getting Started

If you’re ready to refinance; you’ve done your homework by answering the important refinance questions and searching mortgage rates you may qualify for, then you’re ready to get started with TrueFi. The first step will be to answer some basic qualifying questions to insure that you meet minimum lender guidelines and supported loan programs.

In this section, you’ll instantly know if you meet the minimum credit score requirement. You’ll know your credit rating and property valuation. This is an important step to pass. If you don’t meet this, there is no need to provide any more information. Unlike other traditional brokers or lenders, you get the answers you need upfront before wasting your time talking to sales representatives, faxing documents, etc.

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2. Property and Borrower Information

This section asks you simple questions about the property being refinanced and about the borrowers who will be applying for the refinance loan.

Your answers will determine what documents will be needed to upload in the next section.

3. Upload your Documents

Based on your online answers, you will be asked to upload supporting documentation. This is industry standard documentation required by lenders to process your loan.

4. Determine your Loan Amount

View your debt and mark off what you want paid off and enter cash out amount, if applicable. TrueFi automatically calculates your maximum amount you can borrow, your maximum allowable monthly debt, and most importantly, your loan amount.

TrueFi takes the guesswork out of figuring your loan amount and keeps you within the qualifying lender limits.

5. Choose your Loan

Now that your loan amount has been calculated, TrueFi searches through hundreds of programs to instantly provide you with loan offers that you truly qualify for that matches your criteria. Before choosing your loan, you can compare the details of each offer which includes monthly payment, interest rate, realtime settlement charges, and lender fees. Once you have chosen the loan that is best for you, your loan request will be submitted to TrueFi for processing.

TrueFi is the only website that provides realtime loan offers based on your actual financial profile.

6. E-Sign Required Initial Disclosures

Upon receipt of your loan request, you will receive an electronic set of loan disclosures which include documents such as your loan application and Good Faith Estimate.

TrueFi allows you to sign your documents electronically. This saves time and money; as a result TrueFi saves on operating costs such as overnight shipping.

7. Prepare for the closing

Upon receipt of your Esigned disclosures, our processing team will order settlement services (e.g., title work, appraisal, etc.) and prepare the loan package for submission to the lender. They will work with the lender’s underwriting department to clear all conditions required for closing.

Once your loan has been cleared to close, you’ll agree to a closing date and location. The processor will advise you of the final closing costs due within 24 hours of your closing. You may need to secure a certified or cashier's check for any closing costs that are not covered in the total loan amount.

8. Attend the closing

This meeting generally takes less than one hour. You will need to provide any outstanding documentation and sign your loan papers. If there are any closing costs that are your responsibility outside of the total loan amount, be sure to bring a certified or cashier's check.

If you're receiving cash at closing, you will receive your check 3 days from the date of your closing.

9. Congratulations! Now you can relax and enjoy the benefits of your new loan

TrueFi puts you in the driver’s seat of the refinancing process and your financial future.

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Refinancing Resources

For more information on mortgage refinancing, additional resources can be found here:

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