2012 Mortgage Refinancing Basics
“Here Is The 2012 Version Of Mortgage Refinancing Basics”
While the most of the fundamentals that apply to home mortgage refinancing are always going to be valid, there are changes that take place each year that can impact the refinance process.
So today let’s take a look at what I will call the 2012 mortgage refinancing basics that you should have a good working knowledge of before considering any type of a refinancing strategy.
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To start with, the most common reasons today to refinance an existing residential home mortgage is to try and take advantage of lower interest rates, consolidate consumer debt, gain incremental capital for some other purpose, or some combination of the first three.
As we remain in a low rate environment with record levels of average household debt it stands to reason that mortgage refinancing is going to continue to be primarily focused around these two areas individually or in combination.
What Amount Of Refinancing Can Be Secured With An Insured Mortgage?
One of the more significant changes to refinancing considerations relates to mortgage insurance rules.
Over the last few years, the minister of finance has mandated the continued decline of the amount of mortgage financing could be made available for a refinance action, and in July of 2012, the limit has been further reduced to a maximum of 80% loan to value.
While non insured mortgages are also at a max lending amount of 80%, insured mortgages still play a purpose for those individuals who still may not be able to secure a top level rate, even with the 20% equity in place.
But if you’re in need of 85% loan to value from your mortgage funding then you may need to look to a private lender who has the flexibility to consider requests above 80%.
What Costs Are Specifically Related To A Mortgage Refinance Action?
The potential cost items you need to consider when refinancing have not changed in recent years and remain 1) prepayment penalties, 2) appraisal fees, and 3) legal fees.
The prepayment penalty is really the key to determining if a getting a new mortgage in place to pay out the old one makes sense at any given point in time.
If the prepayment penalty is very high, working through the rest of the number may result in you being worse off over time. That’s why its going to be important to contact your existing mortgage provider and get a statement from them of your exact prepayment penalty before you even start considering any options.
And while appraisal fees and legal fees can seem almost trivial in comparison to a prepayment cost, they also need to be factored into the analysis so that you have a clear picture of the cost and benefit of any options you want to consider.
Is It Still Possible To Refinance A Mortgage If You Have Bad Credit?
Yes, you can still refinance with bad credit and in fact there can be even more options for you today than just a few short years ago.
Today there are several sub prime or “B” lender options as well as private lender options available.
The key with bad credit tends to be in estimating the time before your credit will be improved.
If you have some bruised credit that does not allow you to qualify for a new “A” mortgage today, but is expected to be corrected in a year or two, then it may make more sense to leave the existing first mortgage alone to take advantage of its rate and secure a private second mortgage to fill the gap in funding.
Then, when your credit has improved, an “A” credit refinancing can be completed.
This is a good reason why its so important to look at all the options and crunch the numbers to make sure that any mortgage financing decision you make is going to end up being the lowest cost, highest benefit to you.
One of the best ways to accomplish this is to work with an experienced mortgage broker with a solid track record of mortgage refinancings.
If you’re considering refinancing your home mortgage, I suggest that you give me a call so we can go through your situation together and review all the relevant options in detail.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel