Refinancing a home loan is the process of acquiring a new loan to pay off an existing lender.
Reasons to Refinance
Homeowners may choose to refinance for a number of reasons and there is no one size fits all when it comes to refinancing. Below are just a few reasons why a homeowner may choose to refinance.
- Reduce monthly home loan payments
- Switch from an adjustable rate home loan to fixed rate home loan
- Pull equity to finance home improvements
- Consolidate high-interest debt
Refinancing Frequently Asked Questions:
No, you will have to qualify for your new home loan refinance. However certain programs will allow for reduced documentation like an FHA Streamline Refinance or VA IRRRL.
Sometimes your current company can reduce the documentation that is required, but this usually comes at increased costs and interest rate. Make sure that you check to make sure you’re getting the best deal.
No, you may choose any company you wish to refinance your mortgage since the new loan will replace the old mortgage.
You could just compare just the two payments if you wanted to find out your cash flow savings, but the current and proposed loans may have two different amortizations. Let’s say you have a 15-year mortgage currently and you are comparing to a 30-year mortgage.
If everything else is the same (interest rate, loan amount, etc) except for the amortization your interest savings per month would be $0 but, you are going to show a cash flow savings because of the longer amortization.
There is no such thing as a one size fits all scenario when it comes to refinancing a home loan. Some say .5%, some say 1%, and some say never. Every home loan and every families’ needs are different so it is best to work with your loan officer to review your current financial situation and financial goals for a thorough analysis of home loan opportunities to make an educated decision for yourself.
Generally speaking, the rule-of-thumb is 6-12 months, but there are exceptions and it is important you check with your loan officer at the time of initial application to make sure there are not any short-term penalties for refinancing.
Another thing to consider is the cost of refinancing and your break-even point. At Lerette Lending, we monitor our past clients home loan and the market looking to identify opportunities for our clients to save money and provide an annual review just to make sure our clients are in the best home loan to fit their needs.
Related Refinance Process Articles / Resources:
Calculating the net benefit of refinancing can be a challenging task if you do not understand what to calculate. We are going to focus on the net benefits of refinancing from the standpoint of lowering your interest rate. Although there…Read More
For homeowners interested in making some property improvements without tapping into their savings or investment accounts, the two main options are to either take out a Home Equity Line of Credit (HELOC), or do a cash-out refinance. According To Wikipedia:…Read More
Updated on 2018-11-27T13:15:42-05:00, by .