Mortgage refinancing is the process of replacing an existing home loan with a new loan. The goal of refinancing is to assist you in reducing your monthly payments, lowering your interest rates, or change your loan program from an adjustable rate mortgage to a fixed rate mortgage. Moreover, when you make regular payments on your mortgage for several years, you can increase the amount of your home equity.
Consequently, refinancing can assist you in acquiring money against that home equity. You can use the money to fund home renovation projects or for any other purpose.
How does Mortgage Refinancing work?
Mortgage refinancing is essential because it allows you to replace your current home loan with a new mortgage to meet a specific financial objective. The refinancing process does not limit you to work with the same lender, and its closure is more expeditious compared to new purchase loans. After the closing of the refinancing, your old loan is fully cleared, and you can make payments towards the new loan based on the new terms that you agreed during lending.
Additionally, refinancing options are often categorized in the following ways:
- Cash-out: This type of refinancing means that your new loan will be larger compared to your current balance. Therefore, you will be able to receive the difference as cash. The amount obtained can assist you to pay your debts or renovate your home.
- Rate-and-term: This process does not involve changing the principal balance of the loan. This refinancing arrangement only deals with interest rate, repayment terms, or both.
Main Steps to Consider when Refinancing Your Home Loan
1. Have a Financial Objective
Your goal while applying for mortgage refinancing should be to lower your monthly interest rates or payments. Refinancing is only beneficial to people who have a clear financial goal. Therefore, ensure that the new interest rates are low compared to the amount you used to pay for your former loan.
2. Consider your Credit History and Score
Lenders use your credit score to determine the appropriate refinance rates to offer to you. Therefore, you must ensure that you have a higher credit score to attract better refinance rates.
3. Look for the Best Lender
The lender you choose to work with determines the amount you will be required to pay for the other refinance fees. When shopping around for the best lender, you should consider whether the costs will be rolled into your mortgage or be paid upfront. This helps to avoid falling in the trap of lenders who offer "no-closing-cost loans" and add to your loan or charge you a higher interest rate. At First Savings Mortgage we are the best in the market. We are the largest Washington metropolitan's private mortgage lender with the best rates in the market. First Savings Mortgage offers customer-centric services which ensures that you save your money and time. We have offices in Virginia, Maryland, Washington D.C, Florida, Delaware, South Carolina, and North Carolina. Visit any of our offices today for the best mortgage refinancing experience.
4. Disclose your Assets and Liabilities Upfront
When you want to refinance your home, lenders require you to be transparent about your finances. You must provide them will all the necessary financial documents to enable them to review the records in time.
5. Prepare Appraisals for your Home
It is not mandatory, but it essential to have an appraisal because it helps in determining your home's current value. Furthermore, the assessment can be used to determine the amount of money awarded to you when approving your refinancing. In the appraisal list, any type of repairs or improvements you have done to the house with a view of adding to its value.
Benefits of Refinancing your Home
When you refinance your home, here are some of the potential benefits that you stand to enjoy:
- The process allows you to save money because it lowers your monthly payment or interest rates.
- Refinancing enables you to reduce the loan term because it assists you to pay off your mortgage as soon as possible.
- Homeowners who refinance their loans can switch from an adjustable rate to a fixed-rate mortgage.
- Refinancing enables you to take out some money against home equity. You can use the money to pay off other debts, fund home improvement, or in any other way.
Refinancing is the best way to relieve yourself from stressful mortgage debts. Contact our team of experts today for more information on mortgage refinancing.