What does it mean to refinance? Refinancing is the act of taking on a new loan with different terms. Reasons for refinancing your mortgage include lowering your payment, shortening your term or using the equity you’ve built up over time to get cash back out of your home.
What’s Your Goal?
Deciding if it makes sense to refinance your home depends on a number of factors, but it starts with one question:
What do you want out of your refinance?
Here are some of the main reasons homeowners decide to refinance their mortgage:
What is equity? Why is it important for refinancing?
Equity is the appraised value of your home minus the amount you still owe on your loan.
The value of equity depends on your goal for refinancing. The more equity you have, the more money you may be able to get from a cash-out refinance. Or, more equity could result in a better interest rate, which may help you lower your monthly payment. Having enough equity may also help you eliminate private mortgage insurance (PMI), a costly monthly fee included in many mortgages with an original down payment of less than 20%. Talk to a Home Loan Expert to see if you have enough equity to reach your financial goals.
How much does it cost to refinance?
It’s possible to add the costs associated with getting a new mortgage into the total refinance amount to avoid paying anything out of pocket at closing. However, refinancing in order to lower your payment, get cash out or consolidate your debt may result in a longer loan term or a higher rate, and that might mean paying more in interest overall in the long run.
What documents are required to refinance?
The following is a list of documents generally required during the refinance application process: