What's The Deal With Home Refinancing?

​Refinancing a mortgage in today's low-interest environment can not only save you funds but can also help property owners access the equity they've built up in their residence. It's crucial to understand how the process works, how your credit affects your rate, and what you'll do to have the best outcome before starting.

Why should you refinance your mortgage? There are a few frequent reasons for this:

• Save money by taking advantage of a reduced interest rate
• Reduce the length of your mortgage 
• Change from a fixed-rate loan to a changeable rate loan
• Use your home equity savings for an unexpected need or a significant buy
• Remove any private mortgage insurance you're paying now

What is the process of refinancing a mortgage?
Refinancing will feel comparable to applying for a mortgage for the first time. A lender will go through your assets to establish your risk level and qualify for the best interest rate. It's a brand-new loan, and it might come from a different lender than the one you used to purchase your property.

You could be restarting the repayment clock with this new loan. Say you've paid five years of fees on your existing 30-year mortgage. That implies you will pay off the debt in 25 years. If you refinance to a new 30-year loan, you'll have to start afresh and return it in 30 years.

Closing expenses are associated with refinancing, which might influence whether or not having a new mortgage makes financial sense for you. These fees might range from 2% to 5% of the amount you're refinancing. Special offer points, an origination fee, and an appraisal fee are all common closing costs.

What to Consider When Refinancing
Refinancing may not be the most cost-effective option for everyone. Before diving in, there are a few things to consider.

1. Know the Value of Your House
   The very first piece of info you'll need to look over is the amount of equity you have in your property. If the worth of your property is lesser than it was when you took out your mortgage—a situation known as negative equity—refinancing your mortgage isn't a good idea.
   
   
2. Acknowledge Your Credit Score
   In recent years, lending institutions have tightened their loan qualifying criteria. Some customers may be startled to learn that they may not always be eligible for the cheapest rates, even with excellent credit. 
   
   To qualify for the lowest interest rates, lenders typically want a credit score of 760 or higher. Borrowers with poor credit scores may still get a new loan, but they will likely have to pay a higher interest rate or fees.
   
   
3. The Refinancing Costs
   Refinancing a property typically costs 3% to 6% of the entire loan balance, but homeowners can save money in various ways. 
   
   You can roll the fees into your new loan if you have adequate equity. Some lenders will allow "no-cost" refinances, which normally entails paying a slightly higher interest rate to cover closing fees. 

Takeaway
One of the finest financial moves you can make is to refinance your home. Lowering your interest rate by more than half a percentage point might make a significant impact on your budget if you want to stay in your house for years.

At Robinsons Insurance Agency LLC, we do our best in making sure that our clients are well-protected with affordable and comprehensive policies. We make sure to go the extra mile to help you with your needs. To learn more about how we can help you, please contact our agency at  (888) 254-7350 or Click Here to request a free quote.