What you may not know about your mortgage

• Many homeowners have been enticed lately by mortgage interest rates hovering near 5 percent, leading some to think about refinancing their home.  The first step owners should take is to have their property’s value assessed and to contact a REALTOR® to find out what similar homes are selling for in the area, as opposed to their listing prices.  If there have been a high number of foreclosures in the neighborhood, chances are property values have declined.
• Most lenders today will not complete a home loan refinance unless the owner has at least 20 percent equity in the property and proof of income.  However, homeowners who are underwater—those who owe more on the mortgage than the home is worth—still may qualify for a home refinance.  Some federal programs allow homeowners to refinance their mortgage up to 125 percent of the home’s value.
• Some home loans include prepayment penalties, meaning the homeowner has to pay a penalty for paying the loan off earlier than the original loan terms.  Prepayment includes refinancing, as the original loan is paid off through the refinance.  If the fees are equal or close to the amount the owner would save with a refinance, then refinancing the home may not be the best option.