Earn Lower Interest Rates, Refinance Your Home.
Refinancing is a means for a homeowner to acquire a new mortgage once their initial home loan is paid off. It enables the borrower to source better interest terms and rates. The second mortgage is only created once the first one is paid in full, and this means that the homeowner does not have to apply for an entirely new loan. An impeccable credit history assists the refinancing process to secure a fixed loan at a cheaper interest rate.
The purpose of refinancing is to obtain a new mortgage,to discount monthly payments, use the cash for a large acquisition, to lower your interest rates, or shop around for better offers from other mortgage companies. It is essential that the homeowner, considering refinancing, thoroughly investigates all their options and is aware of the pitfalls and dangers in choosing to refinance before making this decision.
There may be penalties incurred by paying up your existing mortgage with your equity credit.Read your current mortgage agreement and if you are unsure, of the provision allowing the mortgage company to charge you these penalties, seek legal advice. These fees can amount to thousands and thousands of dollars. Ensure your refinancing agreement can adequately cover these costs and that once these charges are made provision for, that the refinancing mortgage is still worthwhile and is value for money.
Additional fees may include paying an attorney to oversee your deal and to process the necessary paperwork. The bank concerned may also charge bank and legal fees. Sometimes it is advisable to source lower prices or free refinancing.
How to Refinance.
Firstly you need to sit down and be brutally honest with yourself about how you plan to pay the loan.If you really can afford this debt right now or in the future should anything unexpected happen and you do not have the available cash to pay the home loan.
Then your current mortgage company needs to be contacted, and the various options available to you need to be explored.Contact other lenders and find out what options they have available, it may just be that there is not an option readily available and suitable to your needs right now.
When Is The Best Time To Refinance?
Credit Institutions generally require their borrowers to maintain the original mortgage for a minimum of 12 months before refinancing options are made available to them. Confirm any and all restrictions and details of your term contract before making any decisions.
Refinancing with the original lender makes the most sense but is not essential. Existing credit lenders will probably not require new property appraisals and title searches.They may also offer better pricing to refinancing borrowers.
Why would I Refinance?
The first and most important reason to refinance is to source lower interest rates and decrease the monthly loan amount payable.If you plan to live in your home for the next couple of years, it makes sense to refinance and lower the payments as you earn considerable savings.If however you plan to move sooner rather than later you may not be able to recover the costs associated with the refinancing.
Change between an FRM to an ARM, a Fixed Rate Mortgage means you pay the same amount every month.This mortgage is ideal for long term owners who have the security of knowing what their mortgage payments will be every month and they don’t have the upswing of payments in times when financial interest rates are rising. Adjustable Rate Mortgages may have initial lower payments monthly but these are subject to the fluctuations of the financial markets and interest rate hikes.
Refinancing your mortgage could circumvent a Balloon payment at the end of your mortgage term.
Private Mortgage Insurance can be cancelled through Refinancing, this is however at the discretion of the lender.
Refinancing, Cash-out transactions, make a lump sum of cash available to you when you may need it most, these are fairly easy to acquire, and they may be tax deductible.
The cost of Refinancing
Title costs: the costs of the policy issued by the title insurance company, covering the insured for any losses involving any problems that may arise in the properties title. This fee includes the costs of reviewing public records verifying ownership of the property.
Application fees are the charges for the initial application process and credit record checks.
Fees and points for mortgage originators to prepare and evaluate the loan.
Legal Fees are the amounts that will be charged by the lawyers closing the settlement agreement. These are then charged to the Lender, who charges you the Borrower and your own lawyers fees if you have consulted with someone for professional assistance.
Often homeowners find themselves in situations where it can be difficult to make their mortgage payments.Difficult or unstable economies and high interest rates contribute to these problems. It is in times like these that you may consder Refinancing. Educate yourself thouroughly and armed with this knowledge make calculated decisions on Refinancing.