Home Mortgage Refinancing
Mortgage refinancing ensures you can change your loan to meet your needs and financial goals, whether you want to shorten your term or get a cash-out refinance. However, before you decide to refinance your mortgage, it’s vital to understand what mortgage refinancing is, how it works, and why it’s important. This way, you can make an informed decision based on your individual situation:
What is mortgage refinancing?
Refinancing your mortgage simply means replacing the loan you currently have on your home with a new loan. People refinance their mortgages for various reasons. For example, some homeowners need access to cash to fund home renovation projects or pay off debts. Others want to reduce their monthly payments or get on a fixed-rate mortgage program.
Regardless of your goal, mortgage refinancing offers numerous benefits to homeowners looking to meet their financial goals.
How mortgage refinancing works
Refinancing a mortgage is the process of taking out a new loan to pay off your original mortgage loan to get more favorable terms.
Mortgage refinance process
Like your first mortgage, with a mortgage refinance, you have to research your loan options, obtain the right financial documents, and finally submit a mortgage refinancing application for approval. To qualify for the loan, you have to meet the lender’s requirements, go through the underwriting process, and go to closing.
Below, we’ve explained some of these steps in detail to give you an idea of what to expect.
When you apply for mortgage refinancing, your lender asks for the same information they received when you bought your home. During this process, they look at your credit, debt, assets, and income to determine whether you’re able to pay back the loan.
However, you don’t have to refinance your mortgage with your current lender. You can choose a new lender who pays off your current mortgage, terminating your relationship with your old lender. Therefore, don’t be afraid to shop around for lenders and compare their refinance rates to find what best suits your financial goals.
The underwriting process starts when you submit your application. Here, the lender verifies your financial information to ensure everything is accurate and factual.
3. Home appraisal
An appraisal is a crucial part of your mortgage refinance process as it determines whether your home’s value is equal to or higher than the loan amount you want to refinance. It also helps you determine what options are available to you. For instance, if the estimates come back lower because of damage or repairs, you can choose to decrease your refinance amount or cancel the application altogether.
For many homeowners, going through the refinance application process can be overwhelming. Here’s where we come in. Our mortgage advisors can help you get started with your mortgage refinance prequalification, application, processing, approval, and closing. All you have to do is contact us, and our team will walk you through what’s needed. As experts in residential and commercial mortgages, we understand mortgage refinancing, and our network of lenders offer the best rates and loan programs to meet your needs.
Why mortgage refinancing is important
Mortgage refinancing is essential because it offers homeowners numerous benefits they can take advantage of. Some of these benefits include:
1. Lowers your monthly payments
If you want to pay less every month, consider refinancing your mortgage into a loan with a lower interest rate. However, mortgage interest rates vary based on your circumstances, including your credit history and score. Luckily, you can rely on our vast network of lenders to find the most competitive rates.
Mortgage refinancing can also lower your monthly payments by extending your loan term. The only drawback to this is you pay more interest in the long run.
2. Tap into equity
With mortgage refinance, you can turn your home equity into cash for use on other projects. This is known as a cash-out refinance, and it works by borrowing more than you owe on your current loan. The lender then gives you a check for the loan difference. Many homeowners opt for cash-out refinances because it allows them to borrow money at much lower interest rates than other loans.
3. Change your loan type
Your financial needs and goals are constantly changing, and so can your mortgage. Luckily, by refinancing your mortgage, you can change your loan type to meet your needs. For instance, if you initially had an adjustable-rate mortgage to save on interest, you can switch it to a fixed-rate mortgage.
Additionally, you can choose to change your loan term from a 30-year mortgage to a 15-year mortgage, allowing you to pay off your loan faster. It’s essential to note that while reducing your loan term helps you pay off your mortgage faster, it increases your monthly payments. Alternatively, if you have accumulated enough equity, you can refinance your mortgage to a conventional one without paying for PMI (Private Mortgage Insurance).