So, what is a refinance? Refinancing is the process of replacing your existing loan with a new one. There could be several reasons for doing this. However, the primary one today is to lower the monthly payments. The entire process takes about 30 days, requires qualification and has a cost associated with it (although the costs can be rolled into the new loan).
The process starts by filing a mortgage loan application. Your lender will asses your income, debts and overall credit. Your home will also be analyzed by way of an appraisal to see if you have equity. If everything checks out, the bank will grant you a new loan at a better interest rate than you currently have thereby reducing your monthly payment.
This new loan will pay off your existing mortgage. Many times it will be a few thousand dollars more than your current loan to cover the closing expenses associated with the refinance. Typical closing costs can range from 1% -- 3% of the new mortgage amount. The closing costs are prepared on a form called the Good Faith Estimate which will be provided by the bank. The entire process is handled by the bank or mortgage company that you select.
The two most important considerations are
1) When does it make sense to refinance since there are costs involved?
2) How do I select a reputable company to guide me through this process?
To determine if refinancing will save you money you need to consider how much the process will cost, how much money you will save each month and how many years you are planning to live in the home. For example, let's assume that you find out that refinancing will lower your mortgage payments by $100 per month. If the cost to do this is $3600, then you would see a benefit after three years ($100x36 months equal $3,600). If you are planning to live in your home more than three years, refinancing makes sense and your future savings could be substantial the longer you live in the home. As a result, you can see that the cost alone of the refinance should not be your only consideration in making this decision.
Searching for the best mortgage rate and locating a good lender is usually harder. It is very common for mortgage companies to misrepresent their interest rate and closing costs in a effort to bring in new business. Your best defense against this happening is through education. Educate yourself as much as possible before you move forward. A mortgage guidebook can be very helpful.
Refinancing a mortgage can save you $100's monthly and $1,000s annually. Don't ignore this one time chance because rates are the lowest they have been in 30 years. Finally, this will probably be the biggest financial decision you will make in a lifetime so it's important to spend time and do some research before choosing a lender
------
J Pisicchio is a mortgage loan consultant professional. With over 20 years experience, and trained as a credit analyst, he has helped 1000s of borrowers save money by educating them about the loan process. For more information on how to find the
Best Fixed Rate Mortgage visit
http://www.homeloanfinancingsecrets.com
