What Questions Should I Ask Before I Sign A Refinance?

What questions should I ask before I sign a refinance? Read here to know what questions need to be asked before refinance a mortgage.

Since interest rates are at an all-time low, many mortgage borrowers are looking to refinance their mortgage. This process can be quite confusing and there are several questions a borrower should ask before signing a refinance.

How much will I save?

The first question you should ask before you sign a refinance is how much money are you going to save? For many people, refinancing a mortgage can be an excellent option. If you refinance a 30-year, $200,000 from a 6% interest rate down to a 5%, your monthly payment will drop $120 per month. Over the life of a 30-year mortgage, you would save over $45,000 in interest payments.

How much will the refinance cost?

The next question you should ask before you sign a refinance is how much the mortgage refinance will cost. Most lenders are enticed to refinance someone’s mortgage because they will earn a significant amount of money in fees. Many borrowers are now required to pay points to obtain the low interest rates. These points, which are often paid up front, can cost up to 2% of the mortgage balance. So, for a $200,000 mortgage, points may be up to $4,000. After determining how much the mortgage costs, you will better understand if refinancing makes financial sense.

Is the interest rate fixed?

The last question you should ask before you sign a refinance is whether the interest rate is fixed. Many lenders entice borrowers to refinance a mortgage by offering an initial interest rate which is much lower than market interest rates. The initial period is often 3 to 5 years, at which point the rate adjusts to a much higher interest rate. This often causes many mortgage borrowers to have an unaffordable mortgage payment once the rate adjusts.

What Questions Should I Ask Before I Sign A Refinance?

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