Home mortgage refinance
Introduction
A refinance is a loan taken by an individual so as pay off the existing / original home mortgage. The terms and conditions of a home mortgage refinance vary from one state to another due to the different economical factors in the different states. People go for home mortgage refinance due to different reasons such as;
- To consolidate other debts that they possess.
- To reduce monthly charges.
- To alter and reduce risk.
- To enjoy better interest rates.
- To get cash at hand or to free up cash.
The procedure of applying for a home mortgage refinance loan has some common features with the procedure of applying for a normal loan. It's like applying for a mortgage loan for a second time. There quite a number of costs that are associated with home mortgage refinance. They include costs like; application fee, inspection fee, administration fee, processing fee, loan origination fee among others. However, it is possible for borrowers to negotiate fees like administration, processing, preparation and application.
The following are the important steps to follow when applying for a home mortgage refinance loan.
Step 1
Check the payoff
If the home mortgage refinance interest is not one or more percentage less than the current rate that you are paying, it would not make sense to apply for a home mortgage refinance. Especially if you do not plan to stay in the current home for more than three years.
Weigh and do a calculation of the total savings that you will make if you get a home mortgage refinance against the time that you will take to complete paying the refinance loan. You can do this using the refinance calculators online.
Step 2
Set your target and expectations
A home mortgage refinance can save a lot of money in the long run. But, it is always wise to set a payment target in terms of the time you want have to repay the home mortgage refinance. If you will stay in your current home for a few more years, the perfect loan for you would be an adjustable rate mortgage which has a favorable cap on interest rate increases. But if you want security and reduced monthly expenses, you could go for the 15-30 years fixed rate mortgage.
Step 3
Consider working with your original lender
Since you have created a relationship with your original home mortgage lender and he knows your credit history, it would be advisable to seek a home mortgage refinance loan for him. The company may decide to waive some home mortgage refinance costs and the process may be quicker. The lender may also offer lower rates for you as they will view you as a loyal client.
Step 4
Try an upfront home mortgage refinance lender
Upfront home mortgage refinance lenders disclose their rates to interested clients upfront. This allows home mortgage refinance borrower to gather information that they might need through giving minimal information to their website. It also reduces the stress of moving from one home mortgage refinance provider to another when seeking information. Remember to check the lenders credentials.
Step 5
Seek the services of home mortgage refinance brokers and other professionals
If you do not want to deal with lenders, seeking the services of a broker would be good. A broker will have the different information of different home mortgage refinance lenders and may be in a position to identify the best lender easily.
Seeking the services of a lawyer would be essential as he/she will help you to go through and understand the terms and conditions of the home mortgage refinance provider.
Tips
- Home mortgage refinancing is not the only way to reduce your mortgage term. You can reduce your mortgage term by paying excess monthly charges each month.
- If you have a fixed rate loan that includes escrow charges for insurance and taxes, your monthly charges are bound to change over time due to changes in taxes and insurance fess.
- If you are planning to refinance from one ARM to another, enquire about the fully indexed rates, initial rates and the rate adjustments you are bound to face during the loan term.
