Perhaps you bought a home years ago and thought you were getting the best deal, or at the time, the payments were affordable, and the terms were doable. Time has passed, however, and things have changed. You may consider that your mortgage loan just doesn’t fit anymore, and you want to change the terms, but you already signed the documents. Are you stuck with your mortgage loan, or do you have options? A friend told you to refinance. What is mortgage refinance? This article will explain exactly that.
Your needs for your home loan have changed. Is there anything you can do about it? Certainly! You can get a mortgage refinance. A mortgage refinance is simply a new loan that will replace your existing home mortgage.
Many people refinance their homes for various reasons. It could be that the market has changed drastically, and they want to take advantage of the new rates. Maybe they want to pay off their loan quicker. Some people use refinancing to get cash back and remodel or pay off other loans. Whatever the reason to refinance, this is an easier process than the initial purchase loan and comes in three different forms.
Rate and Term Refinance
This type of refinancing is used when the owner of the home wants to change the rate of the loan to a new lower rate or adjust the term of the loan. The home owner may choose to adjust the rate and the term.
Usually this type of refinancing doesn’t leave the homeowner with cash in pocket but if it does it isn’t a hefty sum.
This type of refinancing is used for the purpose of using the equity of the house as a reason to increase their loan amount. This extra cash can be used to make home improvements, pay off other debts, or build onto the home.
Some people opt to add cash to the loan in order to be able to qualify for a smaller loan payment, lower interest rate, a shorter term, and to cancel certain fees, such as a mortgage insurance premium.
Benefits of Refinancing
Many times, a person buys a home early in life and as time goes on, their credit increases, they have a more stable job, and their good standing with the loan company can give them a much better advantage in the loan process.
This improved status allows the person to qualify for a lower interest rate. By refinancing you can take advantage of this and save money.
Also, as time goes by, the value of the home usually increases. This gives the homeowner the advantage of being approved for a higher loan than the original amount. This higher loan would be paid in cash to the homeowner to be used to either improve the house and increase its value even more or help the homeowner pay off other debts.
There are few risks with refinancing but with any financial deal, you need to protect yourself. Make sure you read through the paperwork carefully and fully understand the loan. Some refinancing comes with additional fees, but you can wait and take advantage of deals that lenders have that includes a free refinancing.
Even with free refinancing, there is some fees that are unavoidable. These closing costs include an application fee, a title fee, and a lawyer fee.
If you are considering refinancing your home, its important that you know exactly what changes you want to see and if you qualify. Refinancing your home could save you hundreds of dollars a year in loan payments.
* This content is not provided by the financial institution or the offer’s provider. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and does not constitute a financial or expert advice.