Mortgage Refinancing

Mortgage refinancing can be a great way to leverage your investment. When you refinance the mortgage on your house, you’re essentially trading your current mortgage for a new one. This new mortgage often has a new principal and a different interest rate.

Why should you refinance your home?

There are a variety of reasons why you might want to refinance your mortgage, including:

• Changing your loan term might help you save on interest. Shorten your loan term to pay off the loan sooner. You’ll pay less interest but your monthly payment may go up. Or, you can lower your monthly payment by refinancing to a longer-term loan.
• If rates are better now than when you got your loan, refinancing may lower your interest rates. Your monthly payment may go down, freeing up cash to help you meet other financial goals.
• Changing your loan type may benefit you as well. An adjustable-rate mortgage (ARM) may have initially helped you save on interest, but you may want to switch to a fixed-rate mortgage if rates are low.
• If your home’s value has increased, you may be able to cash out your equity for home improvement, debt consolidation, or other expenses. Just keep in mind that a cash-out refinance can have tax implications.

How do you refinance a home?

Refinancing is simpler than the home-buying process, but it may involve just as many steps. On average, it will take 30 to 45 days and involves the following steps:

1. Applying is the first step to mortgage refinancing. Review the types of refinancing and find the option that works best for you. The lender will look at your assets, income, debt, and credit score to determine whether you meet the requirements. They may need a few documents including your pay stubs, bank statements, and W-2s.
2. After you get approved, it’s important to lock in your interest rate so it can’t change before the loan closes. The lock period can last anywhere from 15 to 60 days depending on your location, type of loan, and lender.
3. Once your application is submitted, your lender will begin the underwriting process. This step involves the lender verifying your financial information and the details of your property to ensure the details you provided are accurate.
4. A home appraisal must be done before you refinance. Like when you first bought your home, an appraiser will visit your property to estimate its value. Prepare for the appraisal by cleaning up and completing any minor repairs. As long as the estimate comes back equal to or higher than the loan amount, you are set to close on your new loan.
5. The closing disclosure will include the final numbers for your loan. At closing, you’ll go over the details of the loan and sign the documents. If anything happens, you can cancel your refinancing any time before the 3-day grace period (right of rescission).

We offer expert mortgage financing guidance for smart financial decisions. HBI’s financing experts walk you through all the questions and concerns to ensure you arrive at the right decision about whether to refinance—and if so, accept the right offer. Learn more at https://hbitax.com/mortgages/mortgage-refinancing.