Tips For Refinancing Your Mortgage
What To Know Before Refinancing Refinancing, is when a new mortgage replaces the original mortgage on a house. This is done when it benefits the borrower to lock in a different, and better interest term and rate. In order to do this the first loan is paid off and this allows for a second mortgage to be created. This could be great news for people with a nearly perfect credit history. By refinancing it is possible to convert a variable loan to a fixed rate and by doing so lock in lower interest rate. In many circumstances refinancing can work in favor of the borrower and lower mortgage payments. Having the right knowledge and being aware of the economic climate however is huge.
What is Refinancing
When refinancing you are applying for a new loan. In this process obtaining a new mortgage will aim to reduce monthly payments, lower you current interest rates, change to a different mortgage company, and or take cash out of your house for one reason or anther. Since the borrower in a refinance is applying for a new loan there are a few things to keep in mind:
- Your current credit score and payment history.
- Employment history.
- Your source of income and income.
- Your assets such as saving accounts and stocks.
- The current value of your house, otherwise known as an appraisal.
Benefits of Refinancing
- Lower mortgage rate.
- Lower monthly payments.
- Obtain money for a large purchase such as a car or a home remodel. This is possible by taking what is called equity out of the house. Equity is built up over time as the value of ownership increases in a home or property. This represents the current appraisal value of the house less any remaining mortgage payments.
- A more stable monthly payment. Commonly people chose to refinance from an adjustable-rate mortgage(ARM) to a fixed-rate mortgage in order to have a more stable and predictable monthly payment.
- Reset a current loan. If your ARM Loan is about to adjust. For example if you had originally entered into a 7/1 ARM and it’s been six years, refinancing could be an option.
- Consolidate two mortgages. Some people have two mortgages or a mortgage and a home equity line of credit (HELOC). For simplicity it may make since for the borrower to refinance both mortgages into one.
Points to Consider Before Refinancing
There are loan fees to be aware of before refinancing. To counteract or avoid entirely these fees, it is best to shop around or wait for low fee or no-cost refinance. Contact the Colorado Mortgage Group for current mortgage rates and helpful tips and one-on-one counseling to move forward with a refinance.