FAQs About When to Refinance

In the recent years, refinancing a mortgage is more and more common, most likely due to the decline of the economy and the drop of loan rates. This has a dramatic impact on the lives of people who are looking to make a change for the better. Now is the time if you are going to make a change, since you can take advantage of the failing housing market.

Q: Is it better to refinance with your current lender?

A: It seems more logical and common to refinance with your existing lender. They know your property and loan history better than anyone else at that point in time. Switching lenders can result in a hassle with property appraisals, title search and other things needed with a new lender. Also, it is easier for a lender to keep a customer than find a new one, so they are more inclined to help you out.

Q: Should you refinance to pay off a car loan?

A: Do this only under certain conditions, such as using the mortgage interest on your taxes if the after-tax rate on the mortgage is less than car loan interest rate, and there is no penalty for paying early on your car loan.

Q: What is the difference between the rate and APR?

A: The APR, or annual percentage rate, adjusts the interest rate of the mortgage to reflect the closing costs. Lenders are now required to advertise the APR when talking about a mortgage rate. These are never really perfect since the closing costs are estimated.