Home Mortgage Refinance Guide
If you want to change the terms of your mortgage or cash in on your equity, a refinance is often the best way to accomplish your goal. However, the refinance process can be confusing at first, especially if you have never refinanced a loan before. Below are answers to some of the most frequently asked questions about refinance loans.
What is a home mortgage refinance?
When you refinance a home mortgage, you are replacing your previous mortgage with a new loan. The new loan will typically have different terms than the first mortgage, and it may even be offered under a different program. For example, you may refinance an FHA loan and replace it with a conventional mortgage.
Why would a homeowner decide to refinance a home mortgage?
You may decide to refinance a home loan for a variety of different reasons. For example, if interest rates have fallen since you applied for your original mortgage, you may decide to refinance your home loan to get a lower monthly payment and reduce the overall amount of interest you pay. You may also decide to refinance a home loan if you want to make the term of the loan longer or shorter. For example, if you have a 15-year mortgage and you’d like a longer time to pay it off, you may refinance with a 30-year loan.
How much equity do you need to refinance your house loan?
The equity requirements for different refinance loans vary considerably. Some home refinance programs have stringent requirements regarding how much equity you must have before you can apply for a refinance loan. Some programs may require very little equity for a refinance. If you don’t have enough equity, you may still be able to refinance your home loan by putting some extra money down. You can learn about the requirements of specifics home refinance programs by contacting us directly.
How do you qualify for a refinance?
Different types of refinance loans have different qualification requirements. However, in general, the qualification requirements for a home mortgage refinance are like those that applied when you took out your original mortgage. For example, the lender will want to look at your credit score and credit history before approving your application.
The lender will also want to verify that you have a reliable source of income and that your income is high enough to cover the full amount of your mortgage payment easily. In most cases, the lender will compare your monthly income to your estimated mortgage payment, as well as to the total of your estimated mortgage payment plus all other revolving debts, to make sure your income is sufficient. Some refinance programs may have other requirements as well, such as a requirement that you use the home as your primary residence.
Can I take out cash when I refinance a house loan?
Certain loan programs may offer a cash-out refinance, which means that you can take advantage of the equity in your home and receive cash at closing. The amount of cash you qualify to take out will depend on the requirements of the program, the equity in your home, your debt-to-income ratio and other factors. However, it is important to note that you will be required to repay all the money you take out during a cash-out refinance in order to pay off your home, and you will also be paying interest on this amount over the life of the loan.
How do I qualify for the best refinance mortgage rates?
Refinance mortgage rates fluctuate on a regular basis because of changes in the market, as well as other factors. In addition, different lenders may be offering different home refinance rates at the same time. Furthermore, not every borrower will qualify for the best home loan refinance rates available from each lender. Most lenders will offer better rates to borrowers who have better credit scores, a larger amount of equity and/or a shorter loan term.
How do I find home loan refinance rates?
To find the best home loan refinance rates, we will compare rates from all investors and provide you with the best priced options available based on your specific scenario.
What are the best reasons for refinancing a mortgage loan?
You can decide to refinance your home mortgage for almost any reason. However, some reasons for refinancing a mortgage loan may be better than others. It may be a good idea to refinance your mortgage if you:
- Can lower your interest rate significantly.
- Want to reduce your monthly payment by extending your loan term.
- Want to pay down your mortgage faster by reducing the length of your loan.
- Need to consolidate other debts with higher interest rates by cashing in your equity.
- Want to convert your adjustable rate loan to a fixed rate loan.
How does the mortgage refinance process work?
The mortgage refinance process is like the process used when you applied for your original loan. You will begin by applying and supplying the lender with all the supporting documentation requested. This documentation may include proof of your income, proof that you have paid off certain debts, evidence of your ongoing employment and other such documents. The lender will review all these documents to make sure that you meet all the requirements. Depending on the specifics of the program, the lender may also order an appraisal of the property in question to make sure it is still worth enough money to secure the loan. Once all these steps have been completed successfully, a closing will be scheduled.
At closing, your new lender will disburse funds that will pay off the balance of your previous loan. If you are using the refinance to cash in some of your equity, you will receive the money at this time. Your new lender will provide you with information about your new monthly payments, due dates, and other relevant facts.
How much does a refinance cost?
Like all loans, a refinance will usually cost something. The exact amount your refinance will cost depends on the specifics of the program you choose. The costs of a refinance loan come in many different forms, including processing fees, origination fees, taxes, third-party fees and any discount points you have agreed to pay. Some lenders may offer “no-cost” refinance programs, but these programs typically come with much higher interest rates than other programs. Be sure to compare costs carefully before applying to any specific program.
Can I refinance my home if it is on the market?
If your home is listed for sale, lenders won’t typically allow you to refinance it. However, if your home isn’t currently listed, you should be able to find a lender who is willing to refinance the mortgage, even if the home was listed recently. Some programs may have requirements stating that your home must have been off the market for a specific amount of time before you apply for a refinance, but other programs are less restrictive.
Can I use a refinance to consolidate my first and second mortgages?
If you have a first and second mortgage on your home, you may be able to use a refinance loan to consolidate these mortgages into a single loan. However, most lenders will require you to meet certain qualifications before approving this type of mortgage. Talk to your lender to find out if you can consolidate your mortgages with a refinance.
Is an appraisal always required for a refinance?
Most refinance programs will require you to obtain an appraisal before you can qualify for a refinance loan. However, certain programs that offer a “streamlined” refinance may not require a new appraisal of the property. Your lender will make you aware of these requirements when you begin the application process.
Refinancing your mortgage can have many different benefits. However, it is not the right choice in every situation. If you are interested in refinancing your mortgage, talk to a professional lender or mortgage broker today to learn more about your options and decide if this course of action is best for you.