Refinancing Your Mortgage – How Does It Work?
There are a number of reasons why you would want to refinance your mortgage. It could be to leverage the equity you’ve built up in your home, to lock in a lower rate or to shorten the term of your loan. All of these are great reasons to take a little time to understand the process and help you get ahead in one way or another.
In essence, refinancing your mortgage means getting a new loan that will pay off your old loan. Often that means a smaller principal and, ideally, a lower interest rate.
You can take advantage of the equity you’ve built in your home when refinancing. This could mean negotiating a principal that includes the remainder of your home in addition to a sum of money you will get as cash. This could be used to pay for your kids’ education, home renovations or perhaps a reliable car.
Another reason for refinancing is to save money. A lower interest rate saves you the overall amount paid in interest, while a shorter-term means you’re paying your loan off quicker and are on the road to financial freedom. Regardless of your motivation, Matrix Mortgage Global makes refinancing your home simple.
This is also a good time to add or remove a name from the mortgage if there has been a change since your original documents.
How Does Refinancing Work?
To ensure you get the best conditions for your mortgage refinancing, work with a broker. They are familiar with all of the options and stipulations and have established connections that will benefit you.
Your broker can compare rates, conditions and client satisfaction to find a lender that’s right for you. Once you’ve decided on one, the first step is an application.
- The application will require a lot of the same information that was required when you initially applied for your mortgage. Your income, assets, debt, and credit score will be considered and used to determine if you’ll be able to repay the loan.
- Once you’re approved, you’ll be able to lock in your interest rates. This allows you to secure the rate until your mortgage paperwork is finalized. Typically you can lock in rates from 15 – 60 days. If you need to extend the period, it may cost you a fee. Alternatively, you may choose a floating rate which means you could get a better rate if it goes down before closing. However, it also means you may end up with a higher rate. If you’re happy with the rate being offered, it’s a good idea to lock it in.
- When you’ve completed your application, the lender can start the process of underwriting. This allows them to verify the financial information you provided. They will also confirm details like when you purchased your home and complete an appraisal to determine its value. When the underwriting process is complete, a closing date will be arranged.
- The final step is closing the deal. You will have a chance to review the documents and confirm the final numbers for your balance, third-party costs and pre-paid costs. When closing, you’ll go over the details and sign the paperwork. You’ll need to pay any fees that have not been rolled into your mortgage. If you are receiving money from the lender, you will receive the payment after things have been finalized.
If you’re in the market to refinance your mortgage, let ABC Mortgage guide you through the process.
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