Use this guide to find the right time to refinance your home, make changes to your mortgage, and save money in the long run.
Refinancing your mortgage can be a smart move that saves you a lot of money, but you need to know when to refinance and what terms to look for. Our mortgage experts are here to help you take that next step.
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If you’re interested in the housing market, you’ve probably heard about mortgage refinancing. For many, the draw is securing a lower interest rate or a maturity date that’s better for them.
Refinancing a loan means taking out a new refinance loan to pay off the previous one, with new terms that suit you. The best refinance companies are easy to find; shop around and examine different lenders, their rates, terms and loan types. It’s important to find the best company for your needs.
Refinancing is great for getting a handle on your finances, largely through securing a more manageable interest rate bringing down your payments and helping build equity, the value of your home minus the amount you owe, faster. By refinancing to a better interest rate and shorter payoff time, more of your monthly payment will go towards the principal, not the interest. There are costs, so decide if mortgage refinance is right for you by weighing the benefits against the costs.
Many borrowers opt for cash-out refinancing, where they take out a loan for a larger amount than what the house is worth and keep the difference, often to pay off other loans—such as credit cards—which have higher interest rates. Cash-out refinancing can be used for any expenses, not just other debt.
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JG Wentworth is a great choice for those needing their strong customer service and straightforward application. It offers primarily for those with good credit and is a leader in refinancing with its many options geared toward refinancing.
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|Improve your terms and rates||Significant fees|
|Build equity by paying the principal loan||Best rates come with good credit|
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Mortgage refinance companies will base their rates on your credit rating and history. Check if your credit rating is high enough to negotiate a lower interest rate that will make refinancing worthwhile. If you are not getting quotes with rates you'd like, evaluate if now is the right time to refinance and work on getting a better quote down the line. Here’s how:
The best mortgage refinance lenders generally do not approve loans to people whos original home loans are in default. Lenders want to know that you will be able to make your monthly payments, and may require certain income standards, or for the loan to be no more than a percentage of your income.
Once you’re interested in mortgage refinancing, it’s important to examine the costs. You should be able to pay the closing costs, which can include appraisal fees, prepaid interest or points, title search fees, title insurance and loan application fees. You will also need to pay closing fees for the attorney who brokers the exchange. These fees can each run into the hundreds of dollars, so it’s important to be ready to pay them before beginning the refinance process.
You should have already built some equity in your home; the loan amount should be smaller than the value of the property, typically by about 80%.
If these terms and requirements fit your situation, you may be ready to begin the process of a refinanced home loan.
Step 1: Determine if refinancing is cost effective for you. It makes sense if you will make up the costs of the fees through the money you’re saving in your monthly payments and if your credit score is good. If the interest rates are low enough, you can save a lot.
Step 2: Compare the best mortgage refinance lenders, their rates and how long it will take you to pay of the loans they are offering you. Shop around for the right fit and apply to the one that suits you best.
Step 3: Prepare for closing. Bring your photo ID, the money you need for closing and any other documents your lender requests. You have a 3 day right of cancel, should you decide this loan is not right for you.
If you have some equity in your home and are looking for rates and terms that suit your current lifestyle more than your original mortgage loan terms do, refinance might be a great fit. It's important to take into account the costs and fees, as well as the new interest rate and maturity date. If the numbers add up, refinancing can help you wind up with cash in your wallet for other expenses or with lower monthly payments.