Mortgage refinancing lets you save some money. Set your home refinancing goal, then compare rates and fees for your best options.
What Is Mortgage Refinancing?
A mortgage refinance takes your current home loan and replaces it with a new one. Oftentimes, people refinance their properties to reduce the interest rate or cut monthly payments. Others refinance a home to pay off the loan faster, get rid of FHA mortgage insurance, or switch from an adjustable-rate loan to a fixed-rate loan.
How does refinancing work?
When buying a home, you get a mortgage to pay for it. The money goes to the home’s seller. When refinancing a home, you get a new mortgage. Instead of going to the home’s seller, the new mortgage pays off the balance of the old home loan.
Mortgage refinancing mandates you to qualify for the loan, just as meeting the lender’s requirements for the original mortgage. File an application, go through the underwriting process, and go to closing, just like you did when you bought the home.
Why and When to Refinance a Home
- Reduce the monthly payment. If your goal is to pay less every month, you can refinance into a loan with a lower interest rate. Another way to reduce the monthly payment is to extend the loan term.
- Pay off the loan faster. When you refinance from a 30-year mortgage into a 15-year loan, you pay off the loan in half the time. Therefore, you pay less interest over the loan’s lifespan.
- Switch from an adjustable to a fixed-rate loan. Interest rates on adjustable-rate mortgages can go up over time. Fixed-rate loans stay the same. Refinancing from an adjustable to a fixed-rate loan allows financial stability.
- Get rid of FHA mortgage insurance. You can’t cancel the Federal Housing Administration mortgage insurance premium on FHA loans in many cases. The only way to get rid of FHA mortgage insurance premiums is to sell the home or refinance the loan once you have enough equity.
How to Refinance a Mortgage
The following are the basic steps of refinancing a mortgage.
- Set your goal.
- Search for the best refinance rate.
- Apply for a mortgage with three to five lenders.
- Choose a refinance lender.
- Lock in our interest rate.
- Close on the loan.
Refinancing your mortgage is no small task. It can be complicated at times. Visit johnantle.com to read more and ask the expert mortgage brokers any questions about refinancing.