When you refinance your mortgage, you are essentially replacing your existing mortgage with a new one with better terms. Refinancing can come with many benefits including getting rid of mortgage insurance fees, shortening the term or your loan, and switching from an adjustable rate mortgage to a fixed rate mortgage.
To date, the mortgage rates are still hanging low. This gives an extended opportunity for homeowners who missed to benefit from cheaper borrowing costs to refinance. The mortgage refinancing process is not that dissimilar compared to what was involved at the time you first got your mortgage. However, a sound understanding of how refinancing works as well as knowing the options open to you can be an advantage when making an educated decision in order to get the best rate out there. While it is not required to hire an attorney to help you in this process, it is highly recommended. An attorney will help you to avoid scams, protect your interests, and simplify the process.
What Is Refinance?
In the world of real estate, refinancing is the process of replacing an existing mortgage with a new mortgage. The replacement mortgage will then bring much better terms favorable to the borrower. Through mortgage refinancing you can lower your monthly mortgage payment, decrease interest rates, modify the number of years, change periodic terms, remove or add borrowers from the loan obligation, and potentially grant access to spendable cash.
How Does A Mortgage Refinance Work?
When you refinance, your new loan will have a different rate of interest and terms, and could be from a completely different lender than the one you originally worked with.
This new loan might reset the repayment clock. Let’s say that you have made 5 years worth of payment on your current mortgage of 30 years. Given the case, you’re left with 25 years on your loan. Therefore, if you refinance to a new mortgage loan of 30 years, you’ll have to start over and repay it again for 30 years. To refinance to a new 20-year loan means you’ll pay off the loan 5 years early.
Closing costs can be your determiner whether refinancing makes financial sense for you. Getting a new mortgage costs between 2% and 5% of the amount you refinance. Other inclusions in common closing costs are discount points, origination fee and appraisal fee.
Types Of Mortgage Refinance
There are several sorts of mortgage refinancing options to decide on:
Traditional rate-and-term refinances modify either the loan’s interest rate, its term, or both. This can lower your payment every month or benefit you by saving money on interest. The amount you owe however, generally won’t change unless some closing costs are rolled into the new loan.
Cash-out refinances allow you to take a portion of the equity in your home and convert it into cash you can spend. This increases your mortgage debt but gives you money that you simply can invest or use to fund a goal, such as a home improvement project. You can also secure a new term and interest rate during a cash-out refinance.
Debt-consolidation refinances are similar to cash-out refinances, except you utilize the cash from the equity you’ve accumulated for repayment of other non-mortgage debt, like credit card debt. Your mortgage debt will increase, but because mortgage rates are usually less than other loan rates, this in turn, saves you money long-term.
Streamline refinances speeds up the process for borrowers through eliminating requirement portions of a typical refinance (credit check/appraisal). The option is only open for FHA, VA and Fannie Mae and Freddie Mac loans.
When To Opt For a Mortgage Refinance?
There are many things to deliberate and factor in before deciding to go through with refinancing. It’s a good idea to consider current interest rates and other market trends, as well as taking into account your credit score and overall personal financial health altogether. After accounting for refinancing expenses, you should use a mortgage refinance calculator to determine your break-even-point or let us help you to figure this out.
Knowledge on how different other mortgage options work (i.e. loan modification and second mortgages) as opposed to refinancing should eliminate unnecessary misconceptions. It is important to know that refinance gives you a new mortgage to replace your existing one while modification changes your current terms. There is a crucial distinction between getting a second mortgage and refinancing. Speak to a mortgage attorney at Magnolia Law today to help get you the maximum benefits. We can review together what works best for you.
Refinancing With Magnolia Law In Fort Lauderdale
We are here to ensure that the process goes smoothly for you, and that you are happy with the final outcome. From significantly lowering your current interest rate to helping you get that extra money for renovations, you can rely on our expertise as well as our commitment to work tirelessly to serve your best interest. Magnolia Law is where you can feel comfortable and confident, knowing that you will be in experienced hands.