Mortgage Refinancing is when you replace your old mortgage with a new one and your new loan basically pays off your old loan.
After you “replace” your mortgage you have a new set of terms to go by and a new interest rate as well. The new rate and terms will benefit you in some way which is you would be switching in the first place.
This process is usually pretty straight-forward. You apply for a refinance loan, the lender checks your credit score and debt ratios, the lender then sends an appraiser to figure out the value of your property, and if you have a sufficient amount of equity in your home they should approve you and loan you the money.
- Cash-Out Refinance – Cash-Out Refinance is where you pull money out of your homes equity.
- To reduce the amount of interest you will pay overall of your life by either securing a lower rate or shortening your term.
- To lower monthly payments by securing a lower interest rate or extending the payment period.
- To lower your risk and stability by refinancing out of an ARM (adjustable rate mortgage) loan and into a fixed-rate mortgage.
However, there are some risks, such as a penalty clause (clause provisions) from some fixed-term loans that can be triggered by an early repayment in full or in part as well as closing fees. There will also be transaction fees on the mortgage refinancing. These fees must be calculated before continuing on a loan refinance, as they can wipe out any savings collected through refinancing. Penalty clauses are only applicable to loans paid off prior to maturity. If a loan is paid off upon maturity it is a new financing instead of a refinancing and all terms of the prior agreement terminate when the new financing funds to pay off before the debt.
If the refinanced loan has lower monthly repayments or consolidates other debts for the same repayment, it will result in a larger total interest cost over the life of the loan, and will result you remaining in debt for many more years. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether to refinance or not.
If you would like to get pre-approved, please start the process now by calling 855-400-7334.