Refinancing a home loan is a rather simple process. Yet it is smart to know what your options are before undertaking it. Many things have to be considered, you should compare lenders, rates, costs, interest types, etc in order to make a well informed decision.
Refinance Mortgage Explained
When you decide to refinance a mortgage you’ll be canceling a previous loan with the money amount obtained from a second loan. Unless of course your motive is that you are not being able to meet the monthly payments you should make sure that the new loan has overall better conditions than the previous one.
The first thing to consider is the interest rate. You may be able to obtain a refinance with a lower interest rate because market conditions have improved or because your credit and financial situation have improved. Either way, pay special attention to other costs as you may be paying as much in extra fees as what you can save by reduced interests.
If your current mortgage interest rate is variable you may want to refinance your home loan and obtain a fixed interest rate, this will give your monthly payments certainty so you don’t have to worry about sudden increases on your expenses. Fixed rates tend to be a bit higher but the peace of mind that they imply is well worth the small difference.
You can also get a cash-out refinance, you’ll be refinancing for a higher amount than the amount owed so you’ll end up with extra cash for home improvements, buying a car, going on vacations or any other purpose you may think of. Just make sure that you are able to meet the monthly payments. Given that your new debt will be higher, your monthly payments will probably be higher too, unless of course you get a longer repayment program too.
Bear in mind that there are certain expenses that must be paid separately, like attorney fees, closing fees, etc. However, if you don’t have the cash available, you can opt to charge this amounts to the loan principal, thus avoiding the need to find the money in order to close the deal.
How long does it take?
The refinance process is usually completed in a reasonable amount of time. A length ranging from ten days up to a month can be considered acceptable. If you are short on time, make sure to push for a quick closing when you talk about the loan conditions with the lenders as the time they can take is rather flexible. However, if you are not in a rush, you’ll better take your time to request quotes from many lenders and compare rates and other conditions in order to get the best deal available for you.
Finding the lender
The refinance can be obtained from the same lender that holds the previous mortgage or by other lenders. Don’t rush in; compare what the many lenders in the market have to offer. There are online sites offering access to a complete and up-to-date list of lenders dealing with mortgage refinance and this will make the process a lot easier.
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