Mortgage Refinancing
- General Mortgage Refinancing Information
- Reasons for refinancing your mortgage
- When should you consider refinancing
- Requirements for mortgage refinancing
- Are there underwater refinancing options
- Influence of your credit score on refinance rates
- Refinance more than one property at a time
- Pay extra fees and costs in order to refinance
- How long does it take before the process of refinancing is complete
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Mortgage refinancing - General Information
Mortgage refinancing is the process by which a mortgage loan is replaced with a new mortgage, not necessarily with the same mortgage lender. There are a variety of reasons to refinance, such as being able to pay the mortgage off faster. Credit unions and banks frequently make mortgage loans in house, and all lenders subject borrowers to certain criteria in order to ensure that the loan will be repaid. Mortgage fees vary depending on the size of the loan and the lending institution.
Mortgage loans have two main factors- the term and the interest rate. The term is the period of time before the loan must be paid off, and the interest rate is the fee charged for the loan. Mortgages have years-long terms (the most commonplace are 15- and 30-year mortgages). Many people opt to refinance in order to shorten their mortgage term, make monthly payments lower, or pay it off faster.
When a homeowner gets their first mortgage, they can choose a fixed interest rate. Sometimes the prevailing rate can fall below that number, and refinancing the loan is the only way to get the lower rate. Doing so saves the homeowner money every month and over the term of the mortgage. Adjustable rate mortgages (ARMs) have rates that change with the conditions of the credit market. ARMs are sometimes advantageous because rates can drop, but they can also rise, which leads some borrowers to refinance to a fixed-rate loan.
Besides changing the loan's term or interest rate, a lot of people refinance in order to pay off other high-rate loans. The home in question must be worth more than the amount of the loan in order to do this; refinance cash can also be used to make improvements to the home which will increase its value. To refinance, the homeowner has to apply with a new lender. The home has to be appraised, and the homeowner's credit must be checked. A title search is done to ensure that there are no liens on the property, and if everything checks out, the loan is usually approved.
Mortgage refinances include processing fees, which vary from one lender to another. When deciding whether to refinance, homeowners should consider the amount they will save, the costs involved, and the amount of time they will stay in the home. Fees involved include points (money paid to reduce the interest rate), document fees, tax, title and appraisal fees, along with miscellaneous other costs.