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As a homeowner with a mortgage, the topic of refinancing is bound to cross your mind.
But first, you’ll want to understand the common reasons for refinancing, as well as what’s involved in the process. That can help you decide if/when refinancing may be right for you.
Here’s a rundown of what you need to know.
Refinancing your mortgage could serve any of these four purposes:
Before refinancing, check the terms of your existing mortgage to ensure there’s no penalty for prepayment. Then you can move on to the application.
Getting a mortgage refinance is similar to the process you went through to apply and qualify for a mortgage to buy your home. You’ll complete an application, receive disclosures, and provide many of the same documents as before, plus details on your current mortgage. This checklist can help you track down the information you’ll need.
Depending on the type of refinance you choose, you’ll likely need anywhere from 5% to 20% equity in your home to qualify. Keep in mind that if you have less than 20% equity, you may still be required to pay mortgage insurance.
You’ll also have to pay closing costs, usually equaling about 3% to 6% of your outstanding principal. However, you may be able to roll those costs into your new mortgage if you have enough equity.
Once you’ve closed and signed all of the paperwork, you can expect your previous mortgage to be paid off and your new mortgage to go into effect in about four days.
The decision to refinance your mortgage can be made for a number of reasons. But no matter the reason, they all boil down to helping you achieve your financial goals. That could mean cutting down the length of your mortgage so you’re closer to living a mortgage-free life, or locking in a better interest rate to lower your monthly payments to free up funds in your monthly budget.
However, don’t forget to weigh the costs to figure out when you’ll break even before making your final decision. If the savings fit in your timeline, then you have your answer!
We are committed to helping you reach your potential by providing personalized solutions. Our dedicated colleagues can give you the information you need to find the right product to help you reach your goals. To learn more about mortgage solutions, please call 1-888-514-2300, visit us online, or find a Citizens Bank Loan Officer.
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