What You Should Know Before You Refinance Your Home
Refinancing is obtaining a new loan with different terms. Reasons for refinancing your mortgage include lowering your payment to free up room in your budget‚ shortening your term or using the equity you’ve built up over time to get cash back out of your home.
Why should you consider a refinance?
Deciding if it makes sense to refinance your home depends on several factors. Here are some of the main reasons homeowners decide to refinance their mortgage:
Let VA Mortgage Corp evaluate your financial situation and see if refinancing is right for you. Find out how all your options before deciding. With more than 20 years of experience‚ we’ve designed a mortgage process that will work for you.
Today’s Mortgage Rates
Want to find out if refinancing is right for you? A good way to start is by looking at the current mortgage rates. Rates can change daily based on the market‚ so if you like what you see‚ make sure to talk to one of our mortgage experts to get a personalized rate and lock it in as soon as possible.
Try Our Refinance Calculator
Want to see if refinancing makes sense for you? Try out our refinance calculator.
First‚ we’ll ask about your primary goal for your new loan. You can choose between lowering your payment and paying off your home sooner. Depending on which option you select‚ you’ll either be asked what your current monthly payment is or how many years you have left on your loan.
After that‚ you’ll be asked to estimate what you still owe and how much your home is worth to determine the amount of the loan. Then‚ you’ll input a rough credit estimate and your ZIP code.
The results page will show you a sample rate and payment. You can adjust the rate and type of loan‚ as well as add taxes and insurance to find out if refinancing your mortgage can help you meet your financial goals.
Types of Loans for a Refinance
Equity is the appraised value of your home minus the amount you still owe on your current loan.
The value of equity depends on your goal for refinancing. The more equity you have‚ the more money you may be able to get from a cash–out refinance. Also‚ more equity could result in a better interest rate‚ which may help you lower your monthly payment. Having enough equity may also help you eliminate private mortgage insurance (PMI)‚ a costly monthly fee included in many mortgages with an original down payment of less than 20%.
It is possible to add the costs associated with getting a new mortgage into the total refinance amount to avoid paying anything out of pocket at closing. But remember‚ refinancing to lower your payment‚ get cash out or consolidate your debt may result in a longer loan term or a higher rate‚ and that might mean paying more in interest overall in the long run. You need to evaluate to see if it makes sense. A refinance expert can assist you with those numbers.
The following is a list of documents generally required during the refinance application process:
We typically start with how much you want to spend each month on housing. Everyone has a different budget that fits their lifestyle. Most budgets call for 28% of your after–tax income for house payments‚ including your homeowner’s insurance and property tax. For example‚ if your annual income after taxes is $70‚000‚ 28% of that is $19‚600‚ or $1‚633 per month. There are other debts to include when budgeting like child care‚ car insurance‚ etc. A mortgage expert can assist you in coming up with your preapproved price range and what range of purchase price you should be in when shopping around for your new home.
Based on where you live and what kind of policy you want‚ your property taxes and homeowner’s insurance will vary. You can get an estimate on homeowner’s insurance by visiting a provider’s website. To see what kind of taxes you might pay‚ you can ask your real estate agent to help you research the tax rate in the areas where you’re house hunting‚ or you can visit the county tax assessor’s website to find public records of taxes on homes in the neighborhoods where you want to live. Many states also provide a property tax estimator online.
Mortgage closing costs or settlement costs‚ are fees charged for services that must be performed to process and close your mortgage application. Examples of mortgage closing costs include title fees‚ recording fees‚ appraisal fees‚ credit report fees‚ pest inspection fees‚ attorney’s fees‚ taxes and surveying fees. The closing cost of a loan can vary depending on your geographic location.
Lenders are required by law to provide you with two documents which are the Loan Estimate and the Closing Disclosure. These documents outline your closing costs and help you avoid surprises at the closing table.
If you are buying a home‚ you’re usually off the hook for paying a realtor fee. The home seller usually picks up this payment. Typically‚ the fee is paid by the seller at the settlement table‚ where the fee is subtracted from the proceeds of the home sale. The realtor fee is paid by the seller to the listing broker who‚ in turn‚ shares part of it with the realtor who brings a buyer to the table.