What is Mortgage Refinancing?
Mortgage refinancing allows a homeowner to use the money from a second or refinance loan to pay off the balance on an outstanding home mortgage loan. Mortgage refinancing is popular among buyers who are interested in applying for a lower interest rate, extending their mortgage loan period, or using gaining cash from their accrued home equity.
Mortgage refinancing is the process of creating a new loan on a property that has an existing mortgage. When a property owner refinances, the existing loan is paid off by the new lender and a new loan is created between the borrower and the new lender. The two most common reasons that people choose mortgage refinancing are: 1)reducing the interest rate and/or term of the loan and/or 2) taking cash out by accessing the equity in the property. In a “Rate and/or Term” refinance, a borrower creates a new loan with an interest rate and/or term that is less than the original loan without accessing the home’s equity. More than likely, the new loan amount will not be considerably more than the original loan amount. A borrower may choose to do this because a lower interest rate may reduce their monthly payment, while a shorter lease term may reduce the amount of money paid in interest to the lender over the life of the loan. Mortgage refinancing involving accessing the equity in a property is c
Mortgage refinancing is the paying off one real estate mortgage loan with another mortgage loan. There are two types of mortgage refinance transactions. The first type of mortgage refinance is where the first lien on a property is paid off, and less than $2,000 of equity is taken out of the property by the borrowers, either as cash, or to pay down or off other debt, such as a HELOC, credit cards, etc. This type of mortgage refinance is also known as a rate and term mortgage refinance. Closing costs are excluded from the $2,000 and often may be rolled into the refinance. The second type of mortgage refinance is known as a cash-out refinance. This is where over $2,000 of equity is taken out of the property by the borrowers, either in cash, or to pay down other debt. Taking out a either a second mortgage, home equity loan or line or credit at a time after the first mortgage is taken out is also considered a cash out refinance from the lender’s perspective.
Great way to pay of the first mortgage loan Mortgage refinancing is a great way to pay the current home loan or current mortgage loan that you have taken. The collateral for the mortgage refinance is the same property. There are several ways in which mortgage refinancing can be helpful. Get the loan amount that you require You can get a loan with a lower interest rate or a longer term life. In this way there will be smaller monthly payments, but the term life for repayment may increase. Overall the amount that you pay back over a period of time will increase. For example if you have taken a mortgage loan of $600,000. After 3 years, you have paid back $300,000. For the remainder of the amount, you take another loan of $300,000 to cover the present loan; this is known as mortgage refinancing. Reduction in the time period of the first loan and extra cash to pay for other debts You can even reduce the length of the loan. By using the refinanced mortgage loan, you can pay off earlier. Your
If you have never done it, mortgage refinancing can seem complicated. But when you put it simply, the process is easy to understand. When you refinance your home, you are essentially replacing your current mortgage with a new mortgage. In doing so, you use proceeds (or some of them) from the new loan to pay off the balance of the existing mortgage. If the interest rate is lower than when you initially purchased your home, you may be able to lower your monthly payment. Plus, in some cases, mortgage refinancing also lets you “cash out” some of the equity you have built up in your home. This allows you to use the equity for improvements or other expenses without having to sell your home. Here’s an example of how mortgage refinancing works: When Sarah purchased her home a year ago, she financed it with a 30-year fixed rate loan. At the time, she signed up to pay a 7.0% interest rate, but later this year, the rate fell to 6.5%. While a savings of 0.5% might not seem significant, refinancing
