Everything you ever wanted to know about home mortgage refinance is right here. Given in seven easy points, this bird’s eye view will come in handy!
They say nothing is certain but death and taxes. And if you own a home or plan to, you can probably add ‘mortgage’ to that list. Most homes around the world are bought on a mortgage today. More now than ever before. Not only that, but just as common is the process of a home mortgage refinance.
Mortgage explained
A mortgage is where a financial institution issues a loan to a person who is buying a property. The property in the question itself remains as collateral. Here, the principal sum is the original amount of the issued loan, with an additional annual interest rate imposed on this sum. The mortgage is most commonly paid every month. While mortgage has made it possible for people to become homeowners, those who are unfortunately unable to clear the loan often lose the home to the lender. When the lending institute acquires the property in such a process, it is referred to as foreclosure or repossession, and the lender has the right to sell it to someone else.
Home mortgage refinance explained
When someone ‘refinances’ the mortgage, this signifies that the owner has received a secured second loan on the asset, in this case, the home. However, it was already collateral in the existing loan (the original mortgage). There are several things you must keep in mind when planning a home mortgage refinance. Let’s look into some of them now.
- A home mortgage refinance can be a debt consolidation process of sorts since it allows you to get a secured loan so that you may be able to use it to pay off other smaller and existing loans that you already have.
- Advantages of a home mortgage refinance become especially clear when it is compared to existing loans. For example, although this is a new loan on its own, it could offer a lower interest rate and help you pay off other smaller loans with a greater interest rate. It could also be paid off in a longer duration of time than your other existing loans.
- A home mortgage refinance helps the borrower decrease the risk factor as far as the interest rates are concerned. While most debts will likely be at a variable interest rate, a home mortgage refinance can often offer a fixed rate option.
- Usually, a lender offering home mortgage refinance requires the borrower to pay upfront a certain percentage of the total loan being availed. Each point refers to a single percent of the total loan amount, and the interest you are required to pay will most likely be lower if you have paid more points in the initial phase.
- Keep in mind that the lender who offers the lowest interest rate might not necessarily be the best mortgage refinance option. You have to make sure that you are not overpaying on the lending fees or the closing costs.
- Another thing about the interest rates is this; when you are paying a fixed rate, you know just how much you will have to shell out every month to better prepare for it. However, there is no guarantee on the amount you have to pay periodically on an adjustable-rate, although the rates can be generally lower than a fixed one.
- Get your home mortgage to refinance documents handy and maintain a good credit score. Your credit history goes a long way in getting approved for any loan.
To get the latest refinance mortgage rate visit https://www.bankrate.com/mortgages/. However, when you are considering the savings of a 15-year mortgage over a 30-year there is more to consider than simply the interest rate charged. To better understand these costs visit https://kgmeyerpc.com/what-a-15-year-mortgage-really-costs-you/.
