Refinancing 101: A Simple Guide To The Mortgage Refinance Process
As homeowners know, a house isn’t simply the place where you live – it’s an investment. Over the years, you will face important decisions regarding maintenance, insurance, repairs, and more. At some point during your journey of homeownership, one of those decisions may be whether or not to refinance.
What Does it Mean to Refinance Your Home?
Refinancing is essentially the act of replacing your existing loan with a new one. When you refinance, you get a new loan with a new interest rate, and usually a new term. Refinancing is an attractive option for a variety of reasons.
If you’re a first-time homeowner, refinancing can allow you to get rid of mortgage insurance you purchased as a requirement of that loan. Doing so can free up funds that you can use for other necessities or savings. You might also refinance to get cash in hand or to cut down the number of mortgage payments.
Perhaps the most well-known reason to refinance is to get a lower interest rate, which will save you money on monthly payments. Right now, interest rates are at historic lows; surprisingly, it’s not uncommon for people to overlook this opportunity, often because they think it’s a waste of time. Rather than assume it won’t work for you, why not explore your options?
Who is Eligible to Refinance?
Refinancing is a widely accessible option. If you are a homeowner with some equity and decent credit, it’s worth a conversation with an OVM Loan Officer. Don’t count yourself out!
When is the Ideal Time to Refinance?
Homeownership is an individualized journey with many choices along the way. While there are no hard and fast rules for when you should refinance, there are best-case scenarios:
Equity:
As a rule of thumb, it’s recommended to have some equity in your home before refinancing. However, there are exceptions, so if you’re set on refinancing, reach out to us and see if you qualify.
Home value:
If your home has increased in value, refinancing can allow you to get extra cash for repairs or additions.
Improved credit:
If your credit score has gone up since your initial loan and interest rates are low, choosing to refinance can be a great way to lower your payments or even switch to a different type of loan, say from a conventional mortgage to an FHA.
Low rates:
When interest rates are 1% lower than the rate on your current loan, it’s worth having a conversation with OVM.
In addition to the above, certain loan types make refinancing a good option:
Balloon loan:
If you have a balloon loan, you might find that you won’t have the lump payment by the due date, in which case refinancing can provide a solution.
ARM:
If you have an adjustable-rate mortgage, you might want to switch to a fixed rate if interest rates are expected to rise.
How Does the Refinancing Process Work?
Now that we’ve covered all the constituent parts of the journey toward refinancing, let’s talk about how it all comes together.
Call OVM. Our experienced and dedicated Loan Officers can work with any obstacles you might have, like credit score or equity, to help smooth out the process.
From there, you’ll lock in a rate and complete all the necessary paperwork. After closing, you should receive your funds within a few days.
Get in touch with us today to learn more about refinancing your home!
