If you think you’ve been paying too much on your mortgage, then it’s probably time you start a refinance home loan scheme. If you’re not familiar with refinancing, this article will talk you through important aspects of refinancing a mortgage.
What does refinancing mean?
When you hear the word refinance, the first common thought that might cross your mind is to pay again, which is correct. Refinancing means getting a new loan for your mortgage but at a lower interest rate.
Since you’re now paying at a lower interest rate, refinancing allows you to pay less monthly, and you can fully pay your mortgage as soon as you can while still saving money. You can also withdraw money from your home’s equity in case you need an emergency fund.
Steps in refinancing your home loan
Here are the following steps that might be helpful if you are interested in applying for a new loan:
1. Compute and prepare
When it comes to money, it’s always important that you’re financially stable. Never make any impulsive decisions just because you feel pressured or forced. Refinancing is not as simple as buying a new pair of socks.
This step involves doing the entire math. The first thing you can do is check your credit and qualification to apply for a new loan. Also, make sure that you have at least 20% of your home equity.
You can also review some of the available interest rates on the market. Finally, and most importantly, make sure you have enough budget allotted for other expenses and monthly bills.
2. Look for the most compatible mortgage lenders
You might think that you should get your loan from your first lender. But if you feel like you need a change, you can find more available loans that will best fit your budget and needs.
In this step, take the time to thoroughly review and evaluate each loan and check which one is perfect for you.
If you’ve already found a good lender, the next step is to process all your application documents. Make sure that you are prepared to answer possible questions as refinance home loan usually requires a more thorough assessment of your application than your first loan.
4. Let your home be appraised
Once everything is submitted, you can now have your home appraised by an official. This process will let them know your mortgage value. It is also an important factor to consider when choosing a lender because some lenders may charge you additional fees for appraisal, but some do not.
So whether you are willing to pay for the appraisal cost or not purely depends on you. Nonetheless, as long you’re in the hands of a good and reliable lender, then there’s nothing to worry about.
5. Finalise the loan
After you and your lender have settled everything, it’s time to finalise the loan and go into the closing step. This process usually requires you to be present and bring the required documents and extra cash for closing payments.
Refinancing your home is an important aspect of your mortgage, especially if you think that you need a lower payment already. But before you apply, know that the best time to refinance a loan is when the interest rates are at their lowest.
Although it will also greatly depend on your instinct because, like stocks, no one knows the lowest or highest value they can get. The steps in applying for a loan are doing the math, finding a compatible lender, organising application documents, appraising your home, and finally, closing the loan.
Author: Alison Lurie