People often choose to refinance their mortgage. When you refinance, you take out a new loan to finish paying off the original loan. The main reason people choose to refinance is to reduce their monthly payments and lower their interest rates. Another benefit of refinancing includes the ability to switch from an adjustable-rate mortgage to a fixed-rate loan.
How Does The Refinancing Process Work?
When you refinance your home, you reduce your monthly interest rate which can save you money. If you can lock in these reduced interest rates in a fixed income plan, you can save even more money in the long term.
Common Questions About Refinancing
Because the market is always changing, it will depend on your personal situation. Your credit score can also influence these rates. If you have any questions about refinancing, give us a call or take a look at this refinancing article!
As with your existing mortgage, there will be paperwork and fees for refinancing your mortgage. If you plan on leaving your refinanced property in a few years, then you should determine your “break-even point.” By way of definition, the break-even point is where the savings from the refinance offset the cost of completing the refinancing process.
It usually takes at least two years for most mortgage holders to reach this point. To determine your specific break-even point, you will need to look at your closing costs, taxes, and other fees. After examining your costs, compare them against your savings from the reduced costs of your monthly mortgage payments.
Due to the many factors involved in the loan process, it’s hard to pinpoint a general timeframe. It may take a few weeks, a few months, or more than a year to receive approval for your loan.
When you start the loan process, work with your financial advisor to estimate the timeframe for your loan.
- Determine the goal for your loan. Do you want to want to switch to a 15-year fixed-rate plan? Or do you want to save money and reduce your interest rates?
- Begin shopping for mortgage rates. Keep in mind that even if rates are low, you may have higher fees when you first buy that plan. Take time to look into the details.
- Begin applying for your mortgage. Keep in mind that you should execute this step quickly, so your credit score remains healthy. If you wait too long between filling out a loan application and selecting a lender, your credit score may decrease.
- Compare loan amount and fee estimates and select your refinance lender.
- Settle on your interest rate with your lender.
- Finally, close out your loan. Here you’ll pay the closing costs stated in your loan’s terms. Then, the new loan is yours.