When you get a new mortgage to replace your original, it is called refinancing. With a refinancing, the loan you initially got to purchase your home is paid off, which allows the second mortgages to be created. For borrowers that have a great credit history, refinancing is a great way for them to convert a variable loan to a fixed one in order to get a lower interest rate.
In any economic situation, it can become difficult for homeowners to make payments on their home mortgages. Between fluctuating internet rates and an unstable economy, making mortgage payments can become the problem that many homeowners didn’t anticipate. If you find yourself in a situation, make sure that you do your research, so that you can make the best decision for you.
Why might some people not want to refinance?
- Slow Process
It can take as long as 60 days to complete the refinancing process.
It can cost up to 6% of the loan principal to finance.
Things That You Should Know Before You Refinance Your Home
What is your home’s equity?
The first thing that you need to find out is the equity in your home. The good news for homeowners is that home values have been on the rise since the end of 2019. However, it is important to remember that not all homes are the same, and other homes may have not regained their value, which means that they have low equity. Refinancing your home with little to no equity can be difficult with conventional lenders, but there are some programs available that enable homeowners to have that option. The best way to find out what you qualify for is to visit a lender and discuss your unique situation.
The Cost of Refinancing
If you are interested in refinancing your home, the cost will usually be between 3% and 6% of the total loan account. However, there are several things that you can do to reduce the costs or have them included in the cost. It’s always in your best interest to research, negotiate and shop around, as some financing fees can be paid for by the lender.
Rates vs Terms
Most times when thinking about refinancing, borrowers will focus solely on the interest rates. It is crucial that you establish your goals from the beginning so that you can choose the best mortgage product for your unique needs. If you want the lowest monthly payments possible, then it will be best for you to choose a loan with the lowest interest rate for the longest term.
If you are interested in learning more about refinancing, contact Dhugga Mortgages. Let us help you find out what your options are so that you can make the most informed decisions for you and your family.