Many homeowners have experienced a moment when they have wished for a lower mortgage payment. With a mortgage refinance, you could effectively lower your monthly payments. Not sure where to begin with refinancing or whether it's right for you? We've got you covered with some tips and considerations.
What is Refinancing?
When you refinance a mortgage, you're essentially taking out a new home loan and assuming its terms. The money from this loan is used to pay off your existing mortgage. A refinance loan with a lower interest rate than your original loan can eventually save you a significant amount of money. Meanwhile, depending on how much equity you have in the home and how much of your original mortgage was paid off, you can significantly lower your monthly payment as well.
Is Refinancing Right For You?
The best way to know for sure is to consult with a loan specialist, who will crunch the numbers based on your current loan, your home's estimated value, current interest rates and other factors. If the amount of money you'd save by refinancing outweighs any closing costs or other fees you would incur by closing on the new loan, it's probably worth refinancing.
How to Move Forward With Refinancing
If you're thinking about refinancing, it's a good idea to consult with a few reputable mortgage lenders to see what loans and interest rates you can qualify for. From there, you will need to fill out a formal loan application. Some lenders may also require an appraisal on your home; if this is the case, be prepared to pay for the appraisal out of your own pocket.
Once the loan is approved, you will go through a similar closing process as you did when you first bought the home. From there, you can begin enjoying lower monthly mortgage payments and a lower interest rate on your loan. Some homeowners will continue to pay their previous mortgage amount in order to pay off their loans early.