When borrowers refinance mortgages they pay off existing home loans by taking out a new loan. Many reasons exist to refinance home loans. However, the most common is to obtain a lower interest rate over the duration of the loan. Reduced interest rates can save borrowers thousands of dollars on a 15 or 30-year mortgage note.
When homeowners refinance mortgages they must submit a loan application to their preferred lender. Experts recommend organizing financial documents and taking account of finances before contacting lenders. Mortgage refinance requires impeccable credit with a history of paying on time and a solid employment history.
Borrowers who hold a first and second mortgage can roll both loans into the new loan if they hold sufficient home equity and meet lending criteria. Lenders grant or deny refinancing based on appraised property value vs. amount of outstanding principal and interest, and the homeowner's ability to repay the debt.
Mortgage refinancing can be used when homeowners need to borrow money using their house as collateral. Home loans are offered at a lower interest rate than other types of credit. Currently, the national average is 5.03-percent on a 30-year fixed rate loan vs. credit cards at 12-percent.
Using home equity, borrowers can obtain cash to pay off credit cards, automobile or student loans, and other types of debt. Oftentimes, borrowers use the equity of their home to make home improvements; thereby increasing property value.
Homeowners can refinance mortgages at any time; however, many mortgage notes include prepayment penalties for early pay-off. Others charge closing fees. These costs will be in addition to closing costs associated with the refinance loan.
Closing costs range between 3- and 6-percent of the outstanding principal and interest. Some banks offer "no-cost" loans which roll closing costs into the loan. Borrowers will pay interest on settlement costs for the duration of the loan.
The decision to refinance mortgages should not be taken lightly. Homeowners need to be informed about the pros, cons, and true costs associated with this act. Numerous resources are available online, but it is recommended to stick with government agencies and reputable mortgage lenders to obtain accurate information.
Mortgage refinancing should only be used when doing so is in your best financial interest. Otherwise, you could be placing your most valuable asset at risk for foreclosure. Take time to consult with a financial advisor before entering into a new home mortgage loan.
If you are facing foreclosure and do not qualify to refinance mortgages, I might be able to help. As a private investor, I buy houses all across the nation with a focus on real estate located in Orange County, California. I work with a team of more than 2,000 investors who are always on the lookout for a good deal.
If you need to sell your house fast, fill out required information at "we buy houses" and I will contact you to discuss options. There is no obligation, no fee, and no need to disclose personal information.