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Refinance

Reasons why you should refinance your home!

Investing in real estate isn’t an easy task as it requires a detailed understanding of the market conditions, different financing options, exceptional networking skills, and much more. Seasoned property investors always look out for better opportunities by leveraging their investment property loans and ever-changing industry trends.

One of the smart options available to the property investors is refinancing their home property. Home Loan Refinance allows the investors to take the advantage of the market developments by transferring their outstanding loan balances to a new lender with better rates and terms than the existing one.

However, an important question to understand first is when should one refinance a mortgage and what are the benefits of doing the same.

In determining how large of a mortgage you can afford, first consider your income. Deduct your exisiting debts, monthly bills, and down payment, resulting in a debt to income ratio. This will help you evaluate what purchase price and monthly payment best fits your budget.

Knowledge is power that nets you negotiating leverage with lenders. Get your free credit score and keep track of it.

Interest rates are always changing. If you’re stuck paying a high interest rate on your loan, you should check your options. You could save a lot every month.

You can put as little as 3.5 % down. It doesn’t even have to be your own money – the down payment can be a gift or loan.

If you need to finance more than 80 percent of your home’s purchase price or appraised value, an FHA loan might be right for you.

If you’re an eligible veteran and need to finance more than 80 percent of your home’s purchase price or appraised value, a VA loan may be a good option for you.

What is refinancing?

Refinance is essentially, a tool which allows the home loan customers to smartly tackle the fluctuating circumstances to their own benefit. Refinance tool can help the home loan investors substantially reduce the cost of their home loan, if done with proper research and thought process.

To put it simply, Re-financing is a process of taking another home loan to pay off the financing of the existing Home Loan. One of the most common reasons to refinance a mortgage/home loan is to take the advantage of the lower interest rate on the refinanced loan

refinance, lower payment, mortgage, mortgage rates

The process of Home Loan Refinancing :

The process of refinancing the existing home loan is pretty simple and work as below-

  • Once the home loan investor identifies the opportunity with a lender who offers better rates, terms, and conditions, they initiate the process of refinancing the existing home loan
  • Home loan investor reaches out to the new lender with details, which in turn, settle all the dues with the existing lender and take over the outstanding loan amount
  • After the completion of all the refinance formalities, the investor start paying EMIs to the new lender

81%

of people believe buying a home is the best long-term investment a person can make.

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Factors to consider while opting for home loan refinance

Considering the big ticket size of the property investments, the decision of refinancing a home loan should be taken after due consideration. It is essential to consider all the relevant factors before going for the refinance. Some of the essential factors to consider are discussed below-

Take into account all the associated costs

First and foremost thing to remember is the fact that refinancing the home loan involves various costs. The final decision of refinancing should be taken after doing a thorough cost-benefit analysis and accounting for the actual net savings you are going to make in long run by the time you repay the loan in entirety. Some of the costs associated with the home loan refinance include-

  • Legal fees, if any
  • Prepayment charges with the existing lender
  • Processing fees of the new loan
  • Incidental charges with the new lender (in case of a fixed rate home loan) .

Other non-financial factors

The decision of refinancing the home loan shouldn’t be entirely based on the lower interest rates. The other factors non-financial factor to consider include-

  • Terms and conditions of the new lender
  • Reliability of the service aspect
  • Reputation of the new lender etc

Benefits of a Refinance:

Mortgage payment, lower rate, lower monthy home loan

This is one of the main benefits of a Refinance. By refinancing the mortgage /home loan to a term that is longer than the existing mortgage, the homeowner can reduce their monthly payments.

Lower Interest Rates, Refinance, Lower Mortgage Rate, Mortgage Rate

Low-interest rates on a new loan is a major factor that attracts a lot of home loan investors to consider the refinance option. The lower interest rate on the refinanced loan eventually reduces the net interest paid by the time entire loan is repaid.

Refinance, Reduce Loan Term, Reduce Mortgage Rate

As the interest rates drop with changed market conditions, home loan investors often get an opportunity to refinance an existing loan with a new lender that, without much change in the monthly payment, offer a significantly shorter term.
For example, Suppose Clara got a 20-year mortgage five years ago, and she is looking to refinance. In such a case, she doesn’t have to start over with a 20-year repayment period all over again. She can ask to repay it in the shorter time period maybe 10 or 15 years.

Mortgage Insurance, Mortgage

Considering your outstanding loan amount is less than 80% of the appraised value, you may be able to refinance into a loan without mortgage insurance.

This does not apply to someone who has a mortgage insured by the Federal Housing Administration (FHA loan). With the modern-day FHA loans, one can’t cancel the mortgage insurance even when the loan-to-value ratio falls below 80%. The only way to rid of FHA mortgage insurance payments is to refinance the home loan.

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