Bank Refinancing

Bank refinancing is simply another refinancing method wherein the existing mortgage is taken out and refinanced by a banking institution. This is by far one of the most convenient ways for refinancing. Albeit the easiest, many try to veer away from this type of refinancing for two main reasons.

Bank refinancing is done almost the same as any refinancing loans. Before you apply for bank refinancing, find out the various alternatives, and the information about the bank refinancing loan. First, a borrower must prepare paperwork like proof of income, bank account information, and even tax returns. A copy of the deposit of the down payment you paid for the home in question may also be required. During the application process, the bank may send out people to appraise the actual property value, and an inspector to check the house for damages. Sometimes, proof of home ownership is also required.

It is also worth noting that during the application period for the bank refinancing, one should not use any credit sources - do not get anything refinanced or financed since bank policies are stricter. Sometimes, a borrower must first pay off an old debt in order for the bank to refinance him or her.

Once approval is made, everything will be smooth sailing from here on. There will be one or two more meetings with the bank and realtor to close down the property. Be sure to bring any documents, the down payment, or anything else the banker asks you to bring. After closing, the property and the entirety of its property taxes and back dues if any, will now be under your name.

Although banks are on of the most convenient ways to avail of a home refinancing, it is also the most negatively viewed and hated of all refinancing bodies. Below are two of the many reasons why people try to stay away from bank refinancing as possible.

RESPA does not cover banks.

One of the reasons they are least favored as loan offices is because of their exemption from the RESPA or the Real Estate Procedures Act. The Real Estate Procedures Act is a legislation drafted to protect homeowners from abusive lending practices of loan companies by having them disclose their interest rates and markup fees. However, banks fought for this and had them exempted from this legislature.

Banks increase their mark up rates.

For serious takers on mortgage loans, you may have heard about Yield Spread Premium. This refers to the retail markup rate of your mortgage interest rate if loaned from a wholesale lender. Banks, on the other hand, do not have this. Instead, they mark up their mortgage rates to values above the market range in order to boost their profits. Their profits bulk up from selling loans to investors in the secondary market - loans with high interest rates give them good profit. This is in turn called the Service Release Premium. Since banks are exempted from the RESPA, they do not disclose this information upfront.