Refinancing Your Current Home

As a homeowner, you may want to consider refinancing when interest rates fall below your current rate or if you need cash to meet an immediate financial need. Depending on your home's present value, and the terms and payment structures available to you, refinancing could reduce your monthly payments as well as your overall loan expense.

To apply for refinancing now, stop by any RBC Bank banking center or call us at 1-800-789-1108. We'll get the process moving. In the meantime, here is more information to help you make a smart decision.

Reasons to Refinance

Refinancing is a big decision and doesn't come without cost. Here are some reasons why refinancing may make sense:

Get a Lower Interest Rate

If you plan to remain in your home for several years, the savings you will realize in the form of a lower monthly mortgage payment could justify the costs of refinancing your home.

Pay Your Mortgage Off Faster

Many homeowners want to build the equity in their homes more quickly and choose to refinance from a longer-term mortgage to one with a shorter term. With shorter-term loans, a greater percentage of your monthly payment goes to the principal. This can be a particularly good strategy if you're looking ahead to retirement and want to have your mortgage paid off when you get there.

Switch Your Adjustable Mortgage To A Fixed-Rate Loan Or Vice Versa

When interest rates are higher, homeowners often choose adjustable-rate mortgages, which traditionally offer lower interest rates to start. When rates come down, people often refinance to a fixed-rate loan, so they know exactly what their mortgage payment will be over the life of the loan. There are also instances when a homeowner may wish to refinance from a fixed-rate to an adjustable-rate mortgage (ARM). This occurs occasionally when homeowners are looking to lower mortgage payments for a short period of time.

Draw on the Equity Built Up in Your Home

Through either a "cash-out" refinance or a home equity loan, you can tap the equity that has accumulated in your home to pay for college, home improvements or other debt.

Cash-Out Vs. Home Equity

Many homeowners choose to use their home's equity to pay off high-cost debts, college tuition or home improvements. Interest paid on both cash-out refinancing and home equity loans or lines of credit is usually tax deductible (consult your tax advisor), but the similarity ends there. Understanding the differences will help you decide.

	Cash-Out Refinancing	Home Equity Loan	Home Equity Line of Credit
How it works	Your existing mortgage is refinanced for a higher overall amount.	You borrow a fixed amount for a set term-usually up to 70-80% of the appraised value of your home, less what you still owe on your first mortgage.	A revolving line of credit that allows you to draw on it as you need the money. Gives you access to cash when you need it without having to reapply.
How it's secured	All or the majority of your home's equity	All or part of your home's equity	All or the majority of your home's equity
Interest rates	usually lower than home equity loans	usually fixed and generally lower than a home equity line of credit	usually variable and tied to a rate index that can change as frequently as monthly. only pay interest on what you use.

The Cost of Refinancing

When you refinance, you pay off an existing mortgage and take out a new one, so you generally will repeat many of the same steps, provide the same information, and encounter the same costs as you did when you originally applied for a mortgage. Fees generally involved in refinancing include:

Application Fee—covers the lender's cost of processing your loan request.
Appraisal Fee—pays for a professional appraiser to estimate the market value of the property.
Credit Report—pays for a credit report on you and any co-borrowers to verify the information you've already supplied on your loan application and to see how you've handled past debt and credit accounts.
Discount Points--the lender may ask you to pay "discount points" up front in exchange for a lower interest rate on the loan. One point is equivalent to one percent of the amount you borrow.
Legal Services—you may be charged for fees paid to a lawyer or company for conducting the closing.
Origination Fee—covers the work done in evaluating and processing the loan. It usually is expressed as a percentage of the loan.
Miscellaneous Fees—depending on your loan, you may have other expenses for a Department of Veterans Affairs (VA) loan guarantee, Federal Housing Administration (FHA) mortgage insurance, or private mortgage insurance (PMI).
Prepayment Penalty—you may be required to pay an additional amount, usually a percentage of the outstanding principal on your existing mortgage, as a penalty for paying it off early. Laws in many states prohibit or limit mortgage prepayment penalties. Check your mortgage documents or ask your lender if your mortgage contains a prepayment penalty and if a prepayment penalty can be enforced in your state.
Survey Charge—a survey of your property may be ordered to ensure that nothing has changed about the land or its physical structures that would affect a future sale.
Title Search and Title Insurance—covers the cost of examining the public record to confirm your ownership of the property. It also covers the cost of a title insurance policy, which insures the lender for any loss caused by a discrepancy in the title to the property.