9. You Need to Prepare for a Home Appraisal
There are a few things you need to do before you get approved for a refinance. When you consider refinancing your mortgage, a lot will be based on the appraisal. An appraisal is conducted by a certified or licensed professional, and their job is to truly determine how much your home is worth by evaluating many factors. In the case of a refinance, the appraisal is protecting the lender by ensuring that it doesn’t lend the borrower/homeowners more money than what the property is really worth.
The mortgage lender directly orders the appraisal. But there is no need to stress when preparing your home for an appraisal. CHS Realty Advisors have put together ten simple ways to be sure that you get the best appraisal possible so you can enjoy all of the hard work you’ve put into your home.
10. Understand Refinancing is not for Everyone
When mortgage rates are as low as they are today, refinancing becomes popular. But even when rates are low, refinancing your mortgage isn’t always the right choice, and is based on a case-by-case basis.
Deciding when to refinance is no small financial decision, and just because other people you know are doing it doesn’t mean you should too. Talk to a mortgage agent, and they’ll be able to help you determine whether refinancing is a good decision.
11. Understand the Closing Costs and Be Prepared
It’s also worth having a solid grasp and evaluating whether you have the funds to pay the closing costs and fees associated with refinancing, including any penalties your original lender may charge. One may choose to refinance under two circumstances: at the end of your term and within your term.
The chart below outlines which fees are associated under each circumstance.
Mortgage Prepayment Penalty
If you’re refinancing within your term (breaking your contract before it’s up for a renewal), you’ll have to pay a mortgage prepayment penalty fee.
|Fixed Rate Mortgage Penalties
||Variable Rate Mortgage
Three Months Interest
The interest rate differential (IRD)
Three months interest
Mortgage Penalty Fee
If you’re switching lenders, you’ll need to pay a fee to discharge your mortgage from your current lender. Each lender has a different formula, therefore it’s difficult to calculate the penalty yourself and is best to contact your lender for this information.
Mortgage Registration Fee
You must pay this fee regardless of whether you’re leaving or staying with your current lender. This process involves registering your old mortgage amount with your new one. This fee is governed by your provincial government and is typically $70-80.
Legal Fees & Disbursements
It’s a lawyers job to facilitate the entire financial transaction between you and the lender, which is why you’ll need to consult with a real estate lawyer when you refinance your mortgage. Legal fees for a refinance typically range between $1,200 and $2,500.
A home appraisal is needed in order to determine how much the lender will let you borrow. An appraisal fee typically ranges between approximately $300 and $500, depending on the property.
12. Make sure Your Taxes are up to Date
To successfully refinance your mortgage, you will have to prove your income by submitting copies of your income tax returns. Mortgage lenders will want to take a closer look at your financial situation before approving your loan. Your gross monthly income will be compared with your total monthly debts (DTI) to determine if you can afford your new mortgage payments.
Most lenders will require two to three years of tax returns, depending on your employment status, to verify your income has been steady during the previous several years. With that said, homeowners with a steady income pose less of a threat than those whose yearly income varies.
Going through the Refi Process
13. How does it work? Where to get started
Considering refinancing is a new mortgage, you will need to shop around and reapply for a mortgage. Here is what you can expect:
14. Connect with a mortgage agent
You probably heard of the term “shop around to get the best mortgage” when you were first getting your mortgage. Well, the same thing applies when you want to refinance. Shopping around will help you get the best refinancing deal. A mortgage is a product, just like a car, so the price and terms may be negotiable.
When you deal directly with a bank, they can only offer you products that they have. Similarly, when you deal with an Agent, they offer you the same products but from different institutions. At Only Simple, we have access to over 50+ lenders. Meaning we do the shopping for you, giving you more choices and more access. Which means only one application is needed to negotiate with all of the different lenders.
That is to say, we aren’t limited to one lender and we take this opportunity to do what is best for our client. Giving you the best option that is right, for you.