Many home buyers are not aware that they can refinance their homes to improve their current mortgage. There are a number of reasons why it makes sense to refinance. It is possible to negotiate lower payments, or a lower interest rate. Some people may want to pay off their loans faster or to build equity. It may even be possible to turn home equity into cash. A loan officer is the best source of information about refinancing and whether it?s a good choice for you.
Why refinance?
There are many reasons to refinance a home loan. The first and most important reason might be to reduce monthly payments. Nearly two thirds, or 63% of all home buyers are delinquent with their home loan payments. They are by and large not aware that they may have options that will give them relief, such as refinancing their homes to lower monthly payments or to get a lower interest rate.
As many as 59% of home buyers don?t quite understand the terms of their home loans and mortgages, according to a survey conducted in September 2016. They may not be aware of their options when it comes to refinancing a loan.
What is refinancing?
Refinancing is a way to improve the terms of your home mortgage, by getting lower monthly payments or a lower interest rate. Some people may want to reduce the term of the mortgage and to pay off the loan faster, or to build equity faster, by paying more each month. This may even save you money in the long run because you will be paying less interest.
Refinancing is essentially getting a new loan, with new terms. The money from the new loan is used to pay off the old loan. It may also be possible to turn home equity into cash. This is called cash-out refinancing, and does not carry any tax penalties. A loan officer can help you figure out what your options are and which one is best for you.
How does it work?
Since refinancing is essentially the same as getting a new loan, you will need to provide all your financial information to the lender. This includes documents like proof of income, homeowners insurance showing current and sufficient coverage, copies of W-2 forms to verify past employment and income history, asset information like statements for bank accounts and 401(k) accounts, and records for mutual funds or stocks.
You will also need to provide a copy of your title insurance to verify taxes and title. The lender will also want a copy of your credit report.
There are many reasons to refinance: lower monthly payments or lower interest rates, faster loan repayment or turning home equity into cash. More than a third or 35% of all home buyers in 2016 were first turn buyers, according to the National Association of Realtors. This means that they may not be aware of their options in negotiating better terms for their mortgage. A loan officer can help them decide whether refinancing is a good option.
