Refinance Your Mortgage
Taking advantage of a great rate environment is the goal of refinancing your loan. Here’s what it would take to make the most of your refinance.
Refinancing a mortgage can reduce your mortgage rate and lower your monthly payment. It can also leverage your home equity. The number of refinance loan applications increase when mortgage rates decrease. But while refinancing is an everyday practice, the process can be time-consuming and costly. So it’s important to understand how a refi works before applying.
What is Mortgage Refinancing?
Mortgage refinancing involves getting a new home loan to replace a current loan. Since you’re replacing your current mortgage, you’ll complete a new home loan application and re-qualify for the home mortgage. This entails providing your loan officer with supporting documentation. You’ll also need to authorize a credit check and pay closing costs again.
Refinancing doesn’t only create a new mortgage loan. It also allows you to receive new loan terms.
Some people refinance into another mortgage. Others, however, refinance and choose a shorter term. This allows them to pay off their mortgage loan sooner.” to “Some people refinance with the same terms as their previous mortgage. Others, however, refinance and choose a shorter term. This allows them to pay off their mortgage loan sooner.
Why Should I Refinance My Mortgage?
Homebuyers refinance for various reasons. Refinancing is often the only way to get a lower rate and a lower payment. Refinancing can also convert an adjustable-rate mortgage to a fixed-rate mortgage. Some people also refinance into a different mortgage program. They might switch from an FHA loan to a conventional home loan.
When Should You Refinance Your Mortgage?
Some people say that you shouldn’t refinance unless the new mortgage rate is at least two percentage points less than your current rate. This is not a hard or fast rule, though.
There are no restrictions on how often you can refinance a mortgage. So when deciding whether to refinance, calculate the potential monthly savings after refinancing. From here, determine whether the savings is worth the cost. Also, consider how long you’ll live in the home. Ideally, you should live in the home long enough to recoup your mortgage refinancing costs.
Since refinancing replaces an original loan-and requires re-applying for a loan-wait until you’re in a good financial situation. This involves having a strong enough credit score to qualify for a low mortgage rate. Always check your credit report before applying for a refinance.
Cost of Refinancing a Mortgage
Refinancing a mortgage does involve closing costs. This is similar to getting the original mortgage loan. Closing costs vary depending on location. These costs can average as much as 2% to 5% (or higher) of the mortgage balance. Closing costs are paid at closing. It includes the mortgage origination fee, title search fee, attorney fees, points, prepaid interest, and other mortgage-related costs.
Benefits of Refinance Your Mortgage
In addition to a lower mortgage rate, a lower monthly payment, and getting new mortgage terms, refinancing provides an opportunity to cash out some of your home equity. A cash-out refinance involves taking out a loan against the property. You can use these funds for various purposes. These options include home improvements or repairs, consolidate other debt, and more.
Apply for a Refinance Loan
Our experienced team of home loan experts are ready to guide you through the refinancing process. We can answer any questions you have.
