Explain Refinancing a Mortgage
Explain Refinancing a Mortgage - When refinancing a mortgage, you're essentially paying off your current home mortgage and replacing it with a new loan.
To illustrate the concept of refinancing a home, let's take a look at the overall process.
With recent declines in the market, your home's value plays an important role in determining the viability of a refinance. If your home is valued at less than what you currently owe, a refinance may be out of the question unless you have the funds to make up the difference.
Also, what is your current debt-to-income ratio? To determine this value, list your sources of debt and monthly payments and then compare this information with your monthly income. If the ratio is higher than 36%, you may have to clean up some debt (i.e. pay off a few credit cards or a vehicle, for example) to make the percentage more favorable. Additionally, consider your overall credit worthiness. Do you have a history of late payments, foreclosures, or bankruptcies?
Is a refinance worth it?
An online mortgage refinance calculator can give you a quick snapshot of potential savings. Simply input information from your current mortgage statement along with the numbers you've gathered for potential refinance scenarios. (At this information gathering stage, it's fine to just use estimates as benchmarks.)
Now that you've completed some of the preliminary legwork, does it make sense for you to move forward in the process? Even if the answers to the above questions yielded less than favorable responses, you may still qualify for a home refinance. Don't automatically write off the possibility without speaking to a lender.
Start by getting in touch with your current lender to inquire about refinancing opportunities. Ask about the interest rate and closing cost fees, and determine if your status as a current customer entitles you to a waiver of any fees. Then, shop around and collect interest rate and fee information from several potential lenders. Next, revisit the online mortgage refinance calculator. Now that you have actual figures to plug in, you'll get a more accurate picture of which lender presents the most financially favorable refinancing opportunity.
At this point, you can contact your lender of choice about refinancing your home loan. The process will be similar to the following scenario :
Home Refinancing Steps
Refinance Mortgage Rates
Questions to Ask When Refinancing
Mortgage Refinancing Calculator
Cash Out Refinance Mortgage
Cash Out Refinance Calculator
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