How Long It Takes To Refinance A Mortgage
The time it takes to refinance a mortgage always depends on several moving parts, such as credit checks, appraisals and your lenders capacity to handle loans. This process normally takes as few as 15 days but possibly as long as 45 days or more, with an average of 30 days to complete.
Be prepared for possibly longer processing times, says Baruch Silvermann, CEO/founder of The Smart Investor in Los Angeles. At the start of the pandemic, the time drastically increased due to changes in credit requirements as well as uncertainty regarding the new situation. Thankfully, the time it takes to complete a refinance has gone down, but it may still take you a little longer than before.
Mortgages : A Guide To Getting Your Mortgage
Youre probably already familiar with the fundamental concept of obtaining a loan to become a homeowner. But in reality a mortgage is a rather complex marathon of financial calculations, comparing offers, and various approval stages.
In this article well explore mortgages in depth, and in simple, comprehensible terms. Well go over the mortgage process from start to finish, where to look for the best rates, and the vocabulary youll need along the way.
In This Article:
How Do I Get A Mortgage Agreement In Principle
If you have all the right documents ready and have picked out the deal that you want then it can take just 15 minutes to reach an agreement in principle.
In some cases, it can take a few hours for the mortgage lender to fully review the paperwork, and sometimes it can take a few days if there are further issues.
What you usually need for a mortgage in principle:
3-6 months of bank statements
Proof of your income
Passport or other accepted identification
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What Are Common Problems That Delay Getting A Mortgage
One of the most common delays in getting a mortgage is turning in the proper paperwork to the mortgage lender. Its one of the very first steps home buyers need to do and tends to be a tricky one because of the lack of knowledge about how much paperwork is absolutely necessary and the process of getting that paperwork to the lender.
Generally, the paperwork youre going to need to turn in to get a mortgage is:
- Employer income verification
- A detailed outline of assets and debts
- Other records, like K1s and other tax documents
The Other records section can be difficult for many people looking to buy a home because depending on your lender these other records could be a number of different things.
Additionally, employer income verification can be difficult depending on what you do for work. For example, if you want to get a mortgage as an entrepreneur it will be a different process for you.
When youre looking to get a mortgage, other common problems that cause delays like tax verifications from the IRS, employers returning verifications of payment, and housing appraisals.
Can I Repay A Fixed Rate Mortgage Early
An applicant has the possibility to repay this loan early, either fully or partially. In this case, an early repayment charge may apply. If an early repayment charge applies, the local authority should contact the HFA who will calculate the level of the early repayment charge due to be paid by the borrower, should they decide to repay the Home Loan before the end of the term. The early repayment charge will be calculated as follows:
- Reducing balance redemption amount
- Original Irish bond yield for loan term
- Current Irish bond yield for remaining term
- Remaining term in days
where the breakage calculation = ) x T divided by 365.
It should be noted that the costs of repaying the loan early can potentially be significant, depending upon the fixed term remaining and interest rate developments.
For example, the early repayment of a mortgage with an outstanding balance of 239,000 and 28 years remaining to maturity, would have incurred an early repayment charge of approximately 13,500 if transacted in November 2021, based on interest rates applicable at the time. A shorter remaining term or lower outstanding balance would have the effect of reducing this charge, sometimes significantly.
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The Math Behind Your Down Payment
In my case, I was selling my condo to finance the purchase of my new home, so I calculated how much I would have for a down payment based on an estimate of my current homes value.
First, I tallied the costs associated with moving, including real estate agent commissions, legal fees, moving-day expenses, a home inspection and land transfer taxes . To calculate closing costs, the rule of thumb is to budget for 4% of your homes purchase price. A $500,000 home, for instance, would require $20,000.
I decided not to touch my investments or savings to cover these costs, so I subtracted them from the potential profit of the sale. That left me with a down payment of over 20%, which means I didnt have to pay mortgage default insurance.
Lets bring the math to life using the example of a 25-year mortgage for a $500,000 home, assuming a 5-year term and 3% fixed interest rate.
Because I was able to make a larger down payment, I knew that would lower my monthly mortgage payments as well as the amount of interest I would pay over time. My own calculations suggested I would save at least $50,000 in interest.
How Long Does It Take To Buy A House From Start To Finish
According to Zillow, on average it takes four and a half months from start to finish to buy a home. On top of that you have to add 30-45 days while youre under contract to actually close on your home.
Of course, there are a lot of variables that can delay or speed up the four and a half months it takes to buy a home from start to finish. Some variables that you might encounter could be out of your control, such as the volume of the market when you decide to buy a home.
However, other delays in your mortgage process could be common ones that many people experience when going through the home buying process.
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Offset Interest Rates And Current Account Mortgages
So far, the focus has been on mortgages that are variations on a simple theme. You borrow a set amount of money, you pay back a certain amount every month, and your debt is the amount you borrowed minus the repayments you’ve made. So far, so straightforward.
However, for ultimate flexibility, there are mortgages specifically designed to allow you to use them as a place to put your savings. They still come in variable or fixed deals as described above, but with a twist…
An offset mortgage keeps your mortgage debt and savings in separate pots with the same bank or building society. But the big difference is your cash savings are used to reduce or ‘offset’ the amount of mortgage interest you’re charged. Here’s an example:
- If you’ve a mortgage of £150,000 and savings of £15,000, then you only pay interest on the difference of £135,000.
- Your rate of interest stays the same every month. But your savings pot acts as an overpayment, wiping out part of the loan that interest is being charged on every month.This will help you clear the mortgage early.
- As you’re repaying more quickly, it’ll cost you less overall. The most important point is the money can be withdrawn whenever you want with no problem .
Offsets are a good way for your family to help you cope with your mortgage, if they have savings and you don’t, but they don’t want to necessarily part with their cash.
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Should You Refinance Your Mortgage
Refinancing can be a great option if youre looking to save money, borrow cash, or shift to a loan with a stable interest rate. But youll need to check whether you qualify and calculate the costs involved to see if you come out ahead.
If its not the right time to refinance now, then start monitoring mortgage rates and check back later. Because you can refinance as many times as you want, its a good option to check out anytime its right for your situation.
Credible makes refinancing easy. You can see your rates from our partner lenders in the table below in just three minutes. We also provide transparency into lender fees that other comparison sites dont.
Kim Porter is an expert in credit, mortgages, student loans, and debt management. She has been featured in U.S. News & World Report, Reviewed.com, Bankrate, Credit Karma, and more.
Should You Get A Mortgage Deal Which Is Two Five 10 Years Or Longer
Incentive periods generally range from two up to 15 years , but picking the wrong length can be costly. Yet many don’t think this through fully. This can come back to bite you later, meaning you spend more than you need to.
There are many factors to consider before you choose, the key one being…
“How long do you need the certainty for?”
This is most appropriate with a fixed-rate mortgage, as your monthly payments are fixed for the term. Generally speaking, the longer you fix for, the more it will cost. But if you need the certainty of knowing what your payments will be, a fixed mortgage will do this for you.
Here are some things to consider when deciding what length of deal to go for:
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How Mortgage Terms Work
The main difference between the 15-year and 30-year mortgage terms is how payments and interest add up. With a 15-year mortgage, your monthly payments are higher but youll pay less in interest overall. With a 30-year mortgage, the opposite is usually true. Youll end up paying more for your house due to the interest. But your mortgage payments will typically be smaller.
When youre trying to decide on a mortgage term, think about whats best for your budget. Try weighing it against the overall costs. For example, lets say you want to borrow $150,000 toward the purchase of a home. You can choose between a 15-year mortgage rate at 4.00% or a 30-year mortgage at 4.50%. On the 15-year plan, your payment would be approximately $1,110 a month, not including insurance and taxes. You would end up paying close to $50,000 in interest over the life of the loan.
If you opted for a 30-year loan, your payment would drop to just $760 a month. But then you would pay nearly 2.5 times as much in interest. You would have around $350 extra a month to pay down debt, build emergency savings or fund your retirement. That could be greatly beneficial, but your home would come with a much bigger monthly price tag.
Moving To A Full Mortgage Application
Once youve had your offer accepted by a seller, the next step is to move on to a full mortgage application.
This is where the lender starts looking at your income, expenses and personal information in more detail.
As part of a full application, lenders may question the make-up of your income more closely, and carry out a stress test on your finances.
At this stage, you will need to provide certain items of paperwork, including up to six months of bank statements, as well as proof of ID and income.
When you make a formal application, the lender has the right to change the details of the deal set out in the mortgage in principle.
Once you get your formal mortgage offer, this will usually expire within three to six months.
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What Is A Regulated Financial Provider
A regulated financial provider is a company, or mortgage broker on behalf of a mortgage lender, that is regulated by the Central Bank of Ireland and is permitted by the Central Bank of Ireland to provide monies to borrowers who wish to purchase a property.
An example of a regulated financial provider would include banks, building societies or credit unions.
How Much Deposit Do I Need
The maximum loan amount under the Local Authority Home Loan is limited to 90% of the purchase price/market value of the property or, in the case of self-build properties, up to 90% of the total build costs. This means you must raise 10% from your own resources. The requirement to have 10% deposit is not applicable if purchasing a property under the LA Tenant Purchase Scheme.
A minimum of 30% of this deposit amount must come from consistent and regular savings.
For a property with a market value of 200,000 you will need a deposit of at least 20,000.
This must be evidenced by way of:
- a minimum of 6,000 from your personal savings and
- 14,000 from any unborrowed source such as a parental gift, inheritance, the Help-To-Buy scheme for new properties or a combination of these
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Average Mortgage Rates 2020
How much you’ll have to pay for a mortgage depends on the type of mortgage , and interest rates at the time. Interest rates can vary from week to week and from lender to lender, so it pays to shop around.
Mortgage rates were at near-record lows in 2020. According to the Federal Home Loan Mortgage Corporation, average interest rates looked like this as of August 2021:
- 30-year fixed-rate mortgage: 2.87%
- 15-year fixed-rate mortgage: 2.15%
- 5/1 adjustable-rate mortgage: 2.44%
A 5/1 adjustable-rate mortgage is an ARM that maintains a fixed interest rate for the first five years, then adjusts each year after that.
Your mortgage may represent only a portion of your monthly mortgage payment if your lender also requires you to pay your property taxes and homeowners insurance through an escrow account.
To Calculate Your Gross Debt Service Ratio:
Lets say your household brings in a combined $130,000 per year, and you expect to pay $3,000 per month on the mortgage for your new single-family home, plus another $500 on property taxes and $150 on heating. In the eyes of lenders, you would have a GDS of 38%.
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What Is The Central Credit Register
The Central Credit Register is a secure system for collecting personal and credit information on loans of 500 or more. The Central Credit Register is owned and operated by the Central Bank of Ireland.
The Central Credit Register is a national database that, on request, provides:
- an individual credit report detailing an applicants credit agreements
- a lender with comprehensive information to help with credit assessments and
- the Central Bank with better insights into national trends in the provision of credit.
NOTICE: Under the Credit Reporting Act 2013 lenders are required to provide personal and credit information for credit applications and credit agreements of 500 and above to the Central Credit Register. This information will be held on the Central Credit Register and may be used by other lenders when making decisions on your credit applications and credit agreements.
All applicants to the Local Authority Home Loan must consent to the carrying out of credit checks and reporting of the loan application and the performance of the loan to a credit register. The consent is mandatory for the progression of the application form and permission is sought by the applicant as a part of the application form.
Can I Use My Social Welfare Scheme Payment As Income When Applying For A Local Authority Home Loan
Generally, social welfare payments would not be considered as part of repayment capacity. However, certain long-term State benefit payments may be considered as repayment income only where the main income source is of an earned nature .
Long-term State benefit payments considered will be:
- State Pension
- Widows/Widowers Pension
- Invalidity Pension
- Disability Allowance.
The long-term nature of the payment must be confirmed by the Department of Social Protection or other relevant Government Department.
All applications are dealt with on a case-by-case basis and are referred to the local authority’s Credit Committee for a final decision.
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How To Get A 30
Here are the steps youâll need to take to get a 30-year mortgage in Canada.
Save for your down payment: Youâll need enough cash for a 20% down payment, plus the closing costs of buying your new home. Depending on location, closing costs can be between 1% and 5% of the total purchase price.
Find a home in your price range: Once youâve saved diligently, youâll need to figure out how much you can afford. Use our mortgage affordability calculator to work out how much you can afford to buy with your current savings making up at least a 20% deposit.
Find a mortgage provider: While most mortgage providers will offer non-insured, 30-year mortgages, youâll still need to find the best product for you. With a longer amortization period, your mortgage rate will be especially important, so be sure to compare mortgage rates between lenders.