Refinancing Your Home

Refinancing a loan is a great option for anyone that already has a loan but wishes to change the terms of the loan and/or tap into the equity of their home. When a loan is refinanced, a new loan is taken out that pays off the old one. Whatever the terms or conditions were of the new loan will then become the ones that apply to you from then on. The terms of a loan are set, but they can be replaced by another loan, generally one that is more favorable to the borrower. Most homeowners choose to refinance so that they can lower their interest rate, but other common reasons include dropping their mortgage insurance payment, or getting cash in exchange for taking out a higher loan.

Benefits of Refinancing Your Home

The major benefits of a refinance usually have to do with saving money, whether in the short term or in the long term. This can be accomplished by any combination of the following:


  • Lowering your interest rate
  • Changing the term length of the loan
  • Dropping your mortgage insurance payment


Depending on how long you plan on keeping the home, your current financial situation, and your personal preferences, any or all of these can be implemented when refinancing your loan to give you more favorable terms.


In addition to saving money, another common benefit of a refinance is borrowing from the equity of your home. Since mortgage loans generally have lower interest rates and longer terms than personal loans and credit cards, it might be useful to increase your loan amount with a cash out refinance in order to take out a large sum of cash. Since it’s a home loan, you don’t pay taxes on this money, and you have 15-30 years to pay it back. Make sure to talk to your lender to see if this would be a beneficial option for you.

Costs of Refinancing Home Loans

There is always a cost to opening a new loan, and refinances are no different. You will still have fees associated with the lender, closing attorney, title attorney, appraisal (sometimes waived), and you will have to rebuild your escrow account (you get your current balance back). This can make refinancing your home not worth doing depending on many factors, usually determined by how long you plan on keeping the property.


“Months to Recoup” is the term used to describe how long it will take you to make back the costs of the refinance in savings. If it costs you $5,000 to refinance, and you save $50 a month, then it would take you 100 months to recoup your costs. Once you factor in inflation, opportunity costs, etc., doing this refinance might not seem so attractive to some, and to others it might. That’s why it’s always a good idea to ask your lender to help you determine if refinancing your loan is a good idea. An honest lender is willing to give you an answer that benefits you, even if it does not benefit them.

Eligibility

The loan eligibility for refinancing is very similar to what banks look at when you first open a loan. They want to make sure that your basic loan qualifications such as credit score, income, and debt to income ratio are good. They will have a newly updated credit score. They will want to find out the current value of your property because it will have changed since you took out the last loan. The lender will also look at your current assets and savings, to make sure you have enough to pay closing costs and will sometimes require you to have money in reserve in order to cover a few months of payments.

Refinancing Through Brian the Lender

Brian the Lender is highly experienced in refinancing loans. If you are interested in refinancing a loan, you can call him at 706-973-7933 for competitive offers, or apply online.

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