How Does Refinancing Work
Refinancing works by giving a homeowner access to a new mortgage loan which replaces its existing one. The details of the new mortgage loan can be customized by the homeowner, include the new loan’s mortgage rate, loan length in years, and amount borrowed. Refinances can be used to reduce a homeowner’s monthly mortgage payment; to take cash out for home improvements; and, to cancel mortgage insurance premiums, among other uses.
What Is A Mortgage Refinance?
A mortgage is a loan used for real estate. They’re available via banks, credit unions, and online lenders. Hundreds of billions of dollars worth of mortgage loans are given each year.
But, mortgages aren’t one-size-fits-all. Mortgages can be customized.
For example, you can choose the number of years in your loan (i.e. term); you can choose the nature of your interest rate (i.e. fixed-rate or adjustable-rate); and, you can even choose what you pay in mortgage closing costs.
Your needs as a homeowner today, though, may be different from your needs tomorrow. In the future, you may not like mortgage terms you created for yourself.
Thankfully, there’s an option to change your mortgage loan terms. It’s known as a “refinance”.
To refinance your home means to replace your current mortgage loan with a new one. Refinances are common whether current mortgage rates are rising or falling; and you can get one from any lender you choose.
You’re not limited to working with your current mortgage lender.
Some of the reasons homeowners refinance include a desire to get a lower mortgage rate; to pay their home off more quickly; or, to use their home equity for paying credit cards or funding home improvement.
Refinances typically close more quickly than a purchase mortgage loan and can require far less paperwork.
If you have more questions about this article (or anything else) NEVER hesitate to get in touch, I’m happy to help 🙂