What You Need To Know Before Refinancing Your Home

Debt consolidation or mortgage refinance is the process of obtaining a new mortgage with a goal to reduce monthly payments. You can choose to refinance when you want to lower your interest rate, or you need cash to cater for large purchases. People with equity on their homes prefer to choose refinancing. Having equity in your home is simply the sum total of the difference between the value of your home and the amount owed to a mortgage company.

Advantages of Refinancing

• People who refinance with their mortgage companies end up paying less interest on their loans and this increases their credit scores. With a better credit score, you can access more loans if need be.

• Refinancing helps a person in obtaining money for huge purchases. Therefore, they don’t end up using their credit cards thus reducing debts.

Risks involved in mortgage refinance

mortgage refinance

It is important to note that most mortgage agreements allow the company to charge a fee when you choose to refinance your home. These costs sometimes run into thousands of dollars and can be very expensive. Before you finalize your agreement for refinancing ensure that the cost of penalties will be worth it with the value you get in the final run.

You also need to keep in mind the other hidden costs like paying for your attorney who ensures that you get the most beneficial deal possible and bank fees. You can shop around for free refinancing, and this will save you on the bank charges.

The cost of mortgage refinancing

The following are costs involved in refinancing your home.

• The application fee: This cost is usually imposed on by the lenders to cover the expenses when they go through the initial processes of checking your credit score and loan processing.

• The attorney fees: Lenders have to pay for their attorneys who conduct these settlements. The bank then charges these fees to the borrower. You can retain your attorney to represent you in the settlement.

• The title insurance company: This is put in place to cover the cost of policy. The insurance covers the policyholder any loss that may incur due to discrepancies in the title of the property. It also includes the cost of verifying property ownerships by reviewing public records.

When to refinance your home?

Most lenders require one to at least maintain his mortgage for 12 months before thinking of refinancing their home. Each lender has their terms. Therefore, it is best to check with your lender to understand the restrictions that come with the applied mortgage. In most cases it is advisable to refinance with your original lender although this is not always required. Most banks prefer to keep their current clients by offering better prices for those looking to refinance. It saves you in the cost of having to go through a property appraisal all over again since your original lender has this information already. With these facts in mind, you obtain a better rate when you refinance with your original lender.

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