Refinance a Home with
the Best Mortgage Rates
Refinancing a home mortgage can be a big decision for many homeowners. Your situation and needs change over time so why shouldn’t your mortgage? Now might be the right time for you to refinance into a lower rate mortgage. You should take the time to consider the following benefits and drawbacks of refinancing a home to see if this financial solution makes sense for you.
Find the Lowest Refinance Mortgage Rates in the Market
What is Mortgage Refinance?
Refinancing a mortgage is the process of replacing your current mortgage with a new one. Refinancing allows you to reduce monthly payments, lower your interest rates, take cash out of your home for large purchases, or change mortgage companies.
Mortgage Refinance Checklist
- Your identity: Social security card, photo ID
- Your income: Last three pay stubs, W-2s for two previous years
- Your assets: Retirement accounts, investments
- Your debts: Bank statements for two previous months, credit card and loan statements, child support or alimony payments, homeowner’s insurance, property tax bills
- Your creditworthiness.
Pros of Mortgage Refinance
Lower Interest Rates
The historically low interest rates are the best reason to refinance nowadays. A lower interest rate can have a profound effect on monthly payments, potentially saving you hundreds of dollars a year.
Adjustable Loan Term
In addition to lowering your interest rate, refinancing your home comes with another great upside: the possibility of shortening the length of your loan. With rates this low, you can often both lower your monthly payment and shorten the length of your loan, saving thousands in interest.
Lower Monthly Payments
Lowering your monthly mortgage payment by refinancing to a lower rate or extending your loan term can make it easier to pay your mortgage on time every month while also possibly covering your other debts and expenses.
Adjustable Rates Become Fixed
The difference between Adjustable Rate Mortgage loans (ARM) and Conventional Fixed Rate Mortgage loans (FRM) is that, for fixed rates the interest rate is set when you take out the loan and will not change. With an adjustable rate mortgage, the interest rate may go up or down. Escaping from adjustable mortgage rates will not only lower your rate, but also dramatically improve the safety of your loan by eliminating the risk that your rate might increase.
Cash Out Home Equity
Many people improve upon the condition of a home after they buy it. As such, they increase the value of the home. By doing so while making payments on a mortgage, these people are able to take out substantial home equity – a process known as “cash out refinance” – to pay off their additional debts (if any), make home improvements, start a business, or invest towards college tuition.
Drop Mortgage Insurance
When mortgage rates are low, as they are now, refinancing can allow to get rid of private mortgage insurance – also known as PMI. To remove PMI, you must have at least 20% equity in the home. In other words, the refinancing tactic will work for these instances if your home has gained substantial value since the last time you got a mortgage.
Cons of Mortgage Refinance
The cost of a new loan is one of the biggest hurdles to refinancing. Some homeowners are caught off-guard when they’re required to pay closing costs, which range between 3% and 6% of the loan balance. Fees include the home appraisal, the application fee, the title search, the credit report fee, discount points, and the loan origination fee.
Long Application Process
Paperwork, paperwork, paperwork. You will have to suffer a little to get that lower rate. At a minimum, that means completing a lengthy loan application that includes providing all the documentation from the checklist listed above.
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