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Refinancing your mortgage, and what you need to know!

If your mortgage is over 4% then like mine, you’re on the struggle bus when it’s that time of the month to pay your mortgage. As of this blog post, some people are offering interest rates as low as 3.5% but there are some things you need to know before refinancing your mortgage, loan or anything else you may be able to refinance.

Shop around for rates

When I was looking to refinance my mortgage, I knew we wanted something that would decrease our current interest rate (4.625%) and monthly payments. Here are some of the interest rates I was given per company:

Company A: 3.625%-3.75% with a monthly payment of $1,600
Company B: 3.275% but didn't give a monthly payment (the guy also seemed like he was distracted so I didn’t trust the estimate)
Company C: 3.5% with a monthly payment of $1,131
Company D: 3.625% with a monthly payment of $1,135

Cash-out refinance vs traditional refinance

This is a hard decision to make. If you choose to cash out you get cash upfront for projects you want to do like remodeling the kitchen, updating the windows, the list is endless. But this puts the interest rate higher and the monthly payments higher too. 

If you choose to do a cash-out, you should know that your house needs to be worth X amount for you to be able to get the cash-out. So pretty much, if you wanted a cash-out for 30k and your house was appraised at less than what the bank wants. You’re not getting that 30k, but you can get the percentage of whatever your house is appraised at. I would ask the bank/mortgage company for more information about Cash outs if you’re interested. 

We were on the fence for a while about doing a cash-out or not. We decided against it because we would rather a lower monthly payment and save up to redo our windows then pretty much take out a loan for 30k but pay it with our mortgage. 

Hidden info

There is a lot of hidden information about refinancing your mortgage. For example, no matter if you do a cash-out or not you need to get your house appraised which can be a lot of money.

Another hidden fact I learned is the rate and monthly payment they give you is only in the best-case scenario. They need to run your credit, see how much your house is worth, and a bunch of other bank things to see if you get the rate and monthly payment they quoted you.

You also need to make sure you have your W-2’s from the previous year, payment stubs and bank statements. So have fun finding those w-2’s! Luckily my work has an online portal I was able to save as a PDF.

This isn’t hidden info, but I just thought I’d point this out as well. The amount the bank gives you via email doesn’t include escrow. In plain language, escrow pays for your taxes so you don’t have to pay them yourself. I asked Twitter(@DitchinDebt) if you’re better off paying escrow yourself or putting it through the mortgage. Most people agreed that having it built in your mortgage is more convenient, and that really only people who like to control their money to a cent pay it themselves.

Banks won’t know your escrow until you fill out the application and pull your info. All in all, After refinancing my mortgage I will be saving around $300 a month! I’ll take it!

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