7 Things You Should Know About Mortgage Refinancing
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Published by TOP4 Team
Most people define refinancing as obtaining a fresh loan after satisfying an old one. The reason takes on many faces such as seizing an opportunity or privilege brought about by an accelerated credit rating, or an equity that has grown on a piece of property. However, the bottom line remains the same: refinancing has untapped privileges that a homeowner can avail of. However, just like any other forms of financial obligation, refinancing has its risks, therefore, caution should be observed. An informed decision should be sought before one becomes entrenched in the web of mortgage refinancing. Hiring a trusted mortgage broker can also solve your refinancing problems.
Why refinance? This is the first of the seven things you should know.
Refinancing allows a lower mortgage interest rate on the new loan, which will redound to with the benefit of having lower monthly amortisations thereafter, rather than putting up with the higher interest rate on an existing loan.
Second, when is the best time to seek out mortgage refinancing as an option?
When there is prevailing low mortgage interest rates, refinancing is a viable option.
Third, how does credit rating influence your refinancing loan application? Are there remedies for a bad credit rating?
Keeping score of the data outlined in your credit report, a mortgage company has a reliable basis of your credit character, as well as your capacity to satisfy your obligations. In consortium with other factors, your credit rating will determine either the approval or decline of your mortgage refinancing application, thus, efforts should be exercised in making sure that at least your credit score remains high.
In the event of a bad credit score, mortgage refinancing may still be available but on a higher interest rate.
An improved credit rating will open doors to favourable credit terms and access to types of a loan with lower interest rates.
Fourth, what role does home equity play? Is it a determinant factor, too in taking out mortgage refinancing?
Mortgage refinancing can help hasten the building up of your home equity. Consider taking refinancing to jumpstart payment of your existing loan on your home from a 30-year period to a shorter term. The earlier your home loan is satisfied, the earlier you build on your equity.
Short-term loans may require higher monthly payments but a good part of this is applied to the principal amount rather than on the interest expense.
Home equity is an important aspect in the taking out of mortgage refinancing for obvious reasons, thus, the appraised value of your property is determined against your outstanding debt.
Fifth, who are eligible for mortgage refinancing loans?
First, a thorough analysis of your future plans is encouraged. Refinancing is favourable to those who intend to stay longer in their present homes. Projected savings vis-à-vis total refinancing fees should be analysed to determine if the whole prospect of getting refinancing is a sound option.
Like all other financial programs, your eligibility for being granted refinancing is determined by your income, the value of your property, the status of your current loan and other relevant information.
Sixth, what are the basic requirements?
Basically, refinancing requires the same requirements as your original loan which include filling out of a loan application, report on the value of your property, and a credit report which underscores your credit history. Your home equity also becomes part of the requirements.
Secondary requirements include financial statements, proof of income, deposits, title to the property, a property survey and an appraisal report.
As for your original loan that has to be satisfied before refinancing could be granted, a statement detailing your monthly payment, current balances, taxes due, insurance, including other relevant information may be required.
Lastly, how much cost does refinancing entail?
Refinancing entails the basic fees such as application fee, insurance fees, appraisal costs, legal fees (when necessary) and other relevant fees whichever is applicable.
A final fee to close the original loan will also be borne by the borrower. All other fees, including analysis and interpretation of a credit report, can be made a subject of a negotiation between the borrower and the mortgage refinancing provider. Some mortgage loan companies, for the purpose of having an upper hand over their competitors, may even offer a cost-free refinancing application and processing.
Mortgage refinancing, when applied properly for the very purpose it is taken can go a long way in providing every borrower with the opportunity to cash in all the advantages and benefits of this type of loan program.
If you're looking for a reliable mortgage broker that can help your refinancing, consult Lendium today!