Actively considering refinancing your mortgage? It could be a smart move. With interest rates hitting new lows in response to the unprecedented economic consequences of the COVID19 pandemic, many New Mexicans are investigating the potential savings of a refinanced home mortgage.
As with all major financial transactions, it pays to understand what you’re agreeing to. Understanding the terminology, commitment and process involved in refinancing a home mortgage is key to making the right decision on what typically represents one of the largest financial responsibilities in the life of a consumer.
Here are some key points to consider as you proceed with a home mortgage refinance:
Understanding The Difference Between APR and Interest Rates
The interest rate, either fixed or variable, represents the cost of borrowing the principal loan amount. Your monthly payment will be determined by the interest rate and the principal amount.
The APR, expressed as a percentage, measures the broad costs of a loan. It includes the interest rate, broker fees, discount points and some closing costs. Since all lenders are required by law to disclose the APR under the Federal Truth In Lending Act, the APR allows a borrower to compare certain costs of loans from potential lenders.
Anticipating The Length Of The Process
Home mortgage refinance applications typically require 30 to 45 days to close. Completing the loan application, loan estimates and disclosures, loan processing, possible appraisal requirements, underwriting and closing are the typical steps required to successfully complete a home refinance.
Homeowners can expedite their refinance applications by checking the accuracy of all details of their application, having historical records available upon request, being available and flexible for any necessary appraisal and communicating quickly and effectively with the lender as needs arise.
Knowing The Difference Between Principal And Payoff Balances
Towards the end of a loan, some homeowners consider making an early final payment to close the loan. The actual payoff balance will likely differ from the outstanding principal that appears on a statement, however. The difference between the two amounts is interest that accrues on a daily basis. Some borrowers may also be subject to a prepayment penalty depending upon the terms of the loan.
To determine your payoff balance, contact your lender directly. Consider using an electronic payment to pay off the balance to ensure delivery prior to the agreed payoff date.
Timing is important when refinancing a mortgage. By staying informed of interest rates and communicating well with a trusted and reliable financial lender, homeowners can take advantage of the financial relief that accompanies restructured debt.
DNCU Mortgage is part of Del Norte Credit Union, a member-owned, not-for-profit financial institution which embraces the culture and community traditions of New Mexico. Our mission is improving lives by providing our members with unparalleled, sound, and unbiased financial advice.
Call DNCU at 877-818-DNCU today or click here to learn more about our mortgage refinancing.