Are you planning to refinance? Now would be a great time since rates are still low. However, it doesn’t make sense for everyone to refinance when they find interest rates are lower. If you’re thinking about refinancing, you should know the details of the process, so you understand what to expect.
What You Should Know Before Refinancing
What is Refinancing?
To put it in short, you are simply financing your property again. You are repeating the mortgage process to get a new loan. The new loan may come in a short or long term form. Your interest rate and payment may be lowered and you may gain access to the equity you have in your home.
Should You Refinance?
First of all, decide why you want to refinance. What type of a repayment period you are looking – a longer or shorter mortgage term? Do you need a lower payment? Do you need cash for other bills? Or do you simply want to leverage the lowered interest rate to minimize the amount of interest you’re paying? These questions will help you have an in-depth dialogue with a mortgage banker about what kind of structure your refinance should be.
Will it be Profitable?
Knowing how much you will be paying in closing costs and fees will help you figure out whether refinancing would be profitable for you.
Calculating a Breakeven Point of Refinance
Have a detailed conversation with your mortgage broker about all of the costs related to refinancing. Set aside that amount from the money you save each month to calculate the number of months it will take to recover the costs.
A fundamental consideration in whether a homeowner should refinance their current mortgage is the break-even point, which represents whether refinancing will lead to more profit than loss. You should calculate the break-even point on your new loan with a mortgage calculator. The break-even point refers to the point in your mortgage repayment period at which you begin saving on your monthly loan payments. Consider the length of time you are planning on living in that house since it takes time to start saving on your refinanced loan.
What Is Processing Time?
Processing time refers to how long it takes for your application to process. Save on time by recollecting your paperwork from your previous home buying process, eliminate a real estate agent, and a down payment to have a swift refinance process. Some refinances, like the USDA Streamline Refinance, provides you with an easy process by minimizing the amount of paperwork required and removing the necessity for an appraisal. A streamlined refinance process waives off some of the documentation necessities covering income and employment verification, credit score verification, and/or appraisal requirements. The refinance process will take about 30 days. It depends on if the lender wants additional paperwork.
Do You Need To Approach The Same Lender You Used To Buy Your Home?
It’s not mandatory. Look at the companies that offer you special deals, but research them to ensure that they offer the best rates for you.
Which is Best - a 15-Year or a 30-Year Term?
This depends on your budget. Many lenders will help you with the ability to pay extra principal on your mortgage without demanding any prepayment penalties.
Other Than a Lower Rate, Why Should I Refinance?
If you have an adjustable rate mortgage, refinancing may get you a fixed rate. If you are already paying for private mortgage insurance, you could eliminate it by refinancing into a loan type that doesn’t need private mortgage insurance. Some people refinance to pay their real estate taxes or insurance on their own rather than as a part of their monthly payment.
If you and another person have received a loan together, but the other person is no longer interested in being financially obligated, you can try to refinance using only your information to eliminate them from the loan.
What If Your Loan Is More Than Your House Is Worth?
Based on your situation and the type of loan you have, you may qualify for a refinance. Have a conversation with your lender about whether you’re suitable for that type of refinance.
Overall, one of the main reasons people choose to refinance is to eliminate someone’s name from the existing loan and to make a home more affordable.
Mortgage companies in Boston, MA (Massachusetts) have refinancing rates that allow homeowners to refinance. Compare current mortgage and refinancing rates with Mortgage companies in Boston, MA.