When is the Best Time to Refinance Your Home?
When purchasing a home with a mortgage, most prospective buyers are put off by steep interest rates. This rate dictates the percentage of the loan value you'll have to chalk up in interest, should you take the entire 15 or 30-year period to repay the mortgage. Depending on the current economic landscape, homeowners will either decide to take on a fixed or adjustable rate - but what happens when interest drops? You can start by refinancing your mortgage.
Do You Need to Refinance Your Mortgage?
The wait between your initial home purchase and a refinance is the seasoning period. Most mortgage brokers recommend that you take this time to mull over whether a refinance is appropriate to your circumstances.
The ideal window for considering a refinance is a few years into your mortgage, during which you'll pay off the majority of your interest. If you can secure a lower rate from the get-go, you'll save a lot on payments in the long run.
On the other hand, it may not be appropriate to refinance when you're in the home stretch - even if it does save you a couple hundred or thousand dollars.
If you're unsure about whether a refinance makes for an intelligent financial move, discuss options with your lender.
The Process of Refinancing
Refinancing takes on similar characteristics of an initial mortgage. You repeat the process of reviewing loan terms, providing financial documents, and closing a sale. If you're applying for refinancing with the same mortgage company, chances are they'll already have your records on-hand.
If you're looking into changing your home loan terms, below are the steps you need to take towards a successful refinance.
1- Shop Around
As you would an initial mortgage, shop around for the right lender. You can explore options within your existing partnership or seek another that offers a more significant loan-to-value amount or lower interest rate.
2- Prep and Submit Your Paperwork
When you decide to refinance, you'll have to submit paperwork similar to your initial loan requirements. Prepare your documents in advance and get them to your loan officer quickly - this will help keep your remortgage on track.
3- Review Additional Documents
Like you, your lender is obligated to craft documents that outline lending practices and the final details of your loan. The papers should state the amount required for closing and other associated costs. In some instances, you can request that the amount be rolled into your loan.
4- Schedule Closing
With a refinance, closing occurs in a lawyer's office or via a mobile notary. You can schedule closing dates through your lender.
Conclusion
Between a real estate purchase and refinancing of your mortgage, the most significant difference is the absence of a real estate agent for the latter procedure. If loan terms offer a more favorable interest rate shortly after taking out your mortgage, refinancing can make for a suitable method of saving money.
At Lakeway Lending, or refinancing rates can help you save a considerable amount throughout the life of your loan. If you're thinking about refinancing, we'll kick off the process with a refinance analysis request and help you select the appropriate program.