What’s a mortgage refinance?
A mortgage refinance is a new loan that pays off and replaces an existing mortgage loan. Since loans are not typically amended, a refinance mortgage is the easiest way to restructure mortgage debt.
How do I know when I should refinance?
Many homeowners start thinking about refinancing when there’s some part of the existing mortgage loan that’s no longer appealing. Examples include:
- Your payment is too high
- Your interest rate is higher than what’s available on the market
- Your adjustable interest rate is too volatile
- You want to pay off your mortgage in 15 years instead of 30
- You want to cash out your home equity
A refinance calculator http://neighborhoodlender.com/mortgage-calculator can help you run the numbers, but the decision usually depends on how market mortgage rates compare to what you’re currently paying. If you can find a refinance mortgage that will save you money and help you achieve your financial goals, then the time is right.
How does refinancing work?
The application process for a mortgage refinance is very similar to what you may have experienced when you initially purchased your home. A consultation with a lender will occur, as well as a home appraisal. You'll need to complete a loan application and supply the required documentation to verify your income and assets. With the new refinance mortgage funds, the new lender pays off the old mortgage lender, including any prepayment penalties, and transfers any remaining funds to you.
Can I reduce my payment with a mortgage refinance?
Yes. You can reduce your payment by lowering the interest rate and/or by extending the maturity date.
When I refinance, will the finance charges I pay increase?
The total finance charges you pay may be higher over the life of the loan when refinancing your existing loan.
Is a home equity line of credit considered a second mortgage?
Yes, a line of credit is recorded as a lien against the property for the full amount of the credit line.
What’s a cash-out refinance?
If you have home equity, you may have the option of refinancing for more than what you owe on your old mortgage. This is a cash-out refinance, in which the amount leftover after the pay-off is transferred to you, and can be used as you wish. Your payment will reflect a higher loan balance, but you could possibly offset some (or all) of the increase with a lower interest rate or extended maturity date.
What is the Home Affordable Refinance Program (HARP)?
If you're not behind on your mortgage payments but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through the Home Affordable Refinance Program (HARP). HARP is designed to help you get a new, more affordable, more stable mortgage. HARP refinance loans require a loan application and underwriting process, and refinance fees will apply. Contact one of our friendly representatives and we can help determine if you may be eligible for HARP, and get more information on the program here