Popular opinion suggests that financing a property is the hardest part of home ownership. As it turns out, however, this doesn't always hold true. Most real estate loans Brooklyn New York remain fixed to a large extent, but the same can't be said of borrowers' needs. If that sounds familiar, it's well guaranteed that you'll need to reassess your financial situation going forward. This could involve refinancing your mortgage, a process that can be packaged in 2 ways:
Rate-and-term Refinance: This arrangement involves paying off the original loan and replacing it with one sporting a lower rate and/or friendlier terms. Otherwise, the principal remains unchanged, the exception being the case when closing costs are added to the remaining balance. Speaking of which, take note that no money will change hands when you'll be closing the deal.
Cash Out Refinance: This will involve borrowing more money on top of your outstanding loan balance. And from the lender's perspective, the fact that you'll be divesting yourself of your (share of) equity means you're more likely to default. It's for this reason that cash-out refinances tend to be more expensive than their alternatives.
A general rule is that a homeowner should consider refinancing if the prevailing rate is 2 or more percentage points below the one they have. Even so, it takes at least three years for the savings in interest to accumulate beyond the break-even point, given the cost of refinancing. So take these two factors into account before deciding to refinance, after which you may proceed with the rest of the process:
Watch Your Credit: Lenders will use this (among other factors) to ascertain your eligibility for mortgage refinancing. This creates the obvious need to review your credit status as soon as you can. Of course, you'll want to ensure that there are no errors therein. Most importantly, all your inquiries should take place within a two-week period to lessen the impact on your score.
Shop Around: A lot has changed since you took out the original mortgage, so don't just assume that the best offer will come from your current lender. Instead, you'll want to see if you can find a more-favorable option going forward by shopping around. This means consulting other lenders, all while gathering as much information as you can about each offer available.
Apply for Refinancing: It's not until you find the best loan package that you can start filling out application forms. This will of course involve providing lots of financial information supported by appropriate documents. A high level of preparation in advance will translate to a smoother application process.
Get a Rate Lock: Most lenders take between 30 and 60 days to process refinancing applications. What's more important to note is that your rate won't be protected from market fluctuations during this period. As such, it makes sense to lock it in while it's still available.
Overall, be sure to pin down why exactly you're considering the refinance process before going ahead. Is it to pay off your home loan sooner? Free up cash from your equity? Lower your monthly payments? All these reasons are valid, but refinancing will only make sense if it can help you achieve your goals under the current economic conditions.
Rate-and-term Refinance: This arrangement involves paying off the original loan and replacing it with one sporting a lower rate and/or friendlier terms. Otherwise, the principal remains unchanged, the exception being the case when closing costs are added to the remaining balance. Speaking of which, take note that no money will change hands when you'll be closing the deal.
Cash Out Refinance: This will involve borrowing more money on top of your outstanding loan balance. And from the lender's perspective, the fact that you'll be divesting yourself of your (share of) equity means you're more likely to default. It's for this reason that cash-out refinances tend to be more expensive than their alternatives.
A general rule is that a homeowner should consider refinancing if the prevailing rate is 2 or more percentage points below the one they have. Even so, it takes at least three years for the savings in interest to accumulate beyond the break-even point, given the cost of refinancing. So take these two factors into account before deciding to refinance, after which you may proceed with the rest of the process:
Watch Your Credit: Lenders will use this (among other factors) to ascertain your eligibility for mortgage refinancing. This creates the obvious need to review your credit status as soon as you can. Of course, you'll want to ensure that there are no errors therein. Most importantly, all your inquiries should take place within a two-week period to lessen the impact on your score.
Shop Around: A lot has changed since you took out the original mortgage, so don't just assume that the best offer will come from your current lender. Instead, you'll want to see if you can find a more-favorable option going forward by shopping around. This means consulting other lenders, all while gathering as much information as you can about each offer available.
Apply for Refinancing: It's not until you find the best loan package that you can start filling out application forms. This will of course involve providing lots of financial information supported by appropriate documents. A high level of preparation in advance will translate to a smoother application process.
Get a Rate Lock: Most lenders take between 30 and 60 days to process refinancing applications. What's more important to note is that your rate won't be protected from market fluctuations during this period. As such, it makes sense to lock it in while it's still available.
Overall, be sure to pin down why exactly you're considering the refinance process before going ahead. Is it to pay off your home loan sooner? Free up cash from your equity? Lower your monthly payments? All these reasons are valid, but refinancing will only make sense if it can help you achieve your goals under the current economic conditions.
About the Author:
You can find an overview of the advantages you get when you take out real estate loans Brooklyn New York companies offer at http://www.amerimaxcapital.com/about-us right now.
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