Mortgage Refinance

Mortgages represent a loan or lien on a home or piece of property that must be repaid over a specific period of time. There are many different types of mortgages, each with different interest rates and repayment schedules. If you believe your current loan does not suit your needs or your financial situation has changed, it may be time to begin researching home refinancing. 

Consumers choose to refinance their home mortgage for a variety of reasons; however the most common reasons are to obtain a lower interest rate or to build equity faster. Refinancing a mortgage provides you the opportunity to switch your old mortgage, with a higher interest rate, for a new loan, with a lower interest rate, for the same property.

What Steps Do I Take To Refinance?
The most important first step when refinancing your home is to contact several mortgage lenders and shop for the best rate, beginning with your original lender. Ask not only about rates, but also about mortgage types and terms. Also ask what fees are associated with refinancing, such as closing costs and if you are able to roll those into your monthly payment if desired.

How Can Refinancing Save Me Money?
Mortgage lenders will offer an interest rate based on your credit score. If you would like a lower rate, most brokers will allow you to pay discount points at closing, which will lower your rate. For example, you may be offered an eight percent mortgage or a 7.5 percent mortgage with one point. You are required to pay the point amount at or before closing to secure the lower interest rate, which can save you thousands over the life of your loan.

 You can also save money by refinancing to a shorter-term mortgage, for example 10 or 15 years, or refinance to a lower rate and maintain your previous monthly payment, thus putting more money towards principal. This builds equity more quickly in your home and will allow you to pay off the loan in a shorter amount of time. However, it is important to indicate on your monthly payment that the additional money should go towards principal. Not all lenders will automatically apply over-payment directly to principal.

 You can also use the money saved by refinancing to pay off other loans or debt, especially those with much higher interest rates than a home mortgage loan typically has.

What are the Typical Fees Associated With Refinancing?
Some mortgage lenders will allow you to finance the points to lower the rate, as well as closing costs. This is typically known as a no-cost refinance. Rolling these costs into your loan may result in a higher monthly payment, but if the interest rate is lower, it may still save you thousands of dollars over the life of the loan.

When Should I Refinance?
• When your credit score has improved. This may allow you to be eligible for a lower interest rate.
• When interest rates are lowered. If the Fed has recently lowered interest rates below your current home loan rate, this may be a good time to consider refinancing.
• When your adjustable rate mortgage is due to reset. Homeowners with adjustable rate mortgages are permitted to refinance their homes. You do not have to accept the higher rate your loan may reset to, instead evaluate your current position and obtain new loan quotes from several lenders.

Things to Remember Before Refinancing
The most important thing you can do before signing the paperwork for home refinancing is to consider all your options. Obtain a quote from several qualified lenders and choose the rate and terms that are the best fit for you. Refinancing is a great option to save money over the course of your loan, as well as an easy way to find extra money to pay off other higher interest rate loans. Carefully consider your personal financial situation before making any decisions and researching your options will result in the best home refinancing loan possible.