This process refers to applying for a secured loan to replace an existing loan. When it comes to refinancing there are several things to consider:
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What am I trying to accomplish with a refinance?
Are you trying to lower your monthly payments or are you considering locking in on a fixed rate? Maybe you are interested in interest only payments. Are you looking to pull cash out to do repairs around your home or pay off debt(s)? Are you looking to eliminate a second mortgage? These are all possible options when considering to refinance. The length of time you plan to live in the home can help determine when you should refinance. If you plan to live in your home for 7or more years, you may want to consider refinancing into the lowest fixed rate possible. However, if you only plan to live there less than seven years, you may be interested in interest only payments which could lower your monthly payment considerably.
- What is required of me to be able to refinance my home?
- You must own your home
- Credit is a factor
- No 30 day late mortgage payment
- Typically there must be some equity in the property
- There may be some out of pocket fees associated with refinancing your home such as:
- Application fees
- Appraisal fee
- Closing cost
Check with your mortgage professional regarding out of pocket expenses.
- What are some things banks consider when applying for a loan to refinance?
- Banks look at your credit. How credit worthy are you? Having good credit allows you to get a better rate and have more options when refinancing. It is important to never default on your monthly loan payment(s).
- How much equity is in your home or how much is your home worth? To get the true value of your home, a certified appraisal must be done. Ask your mortgage professional if there is a prepayment penalty associated with this loan. Prepayment penalties occurs when you pay off your loan before a certain specified time, as stated in your loan. This can be anywhere from six months to three years. This must be accounted for, as this could cost you thousands of dollars if you sell your home before this time period is up.
- Refinance loans fund three days after you close. This is a grace period that gives you the time to change your mind. Always shop around for your loan. Compare to make sure you are getting the best deal possible. Always choose reputable institutions when obtaining any type of loan. Always do your own research when applying for a loan.
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