If you have a mortgage, then you already know a little bit about home financing. Most people cannot afford to purchase a home outright. They need to get a mortgage for a good portion of the home. Years ago, mortgages were practically unheard of and those that were made to customers were only made for fifty percent of the price of the home. For this reason, most people in the United States, 60 years ago, rented instead of owned property.
A refinance is when a homeowner applies for a new mortgage to cover the amount of the old mortgage. There are many different reasons why people refinance their mortgages. In most cases, refinancing is done to gain a lower interest rate. In other cases, monthly mortgage payments are lowered by stretching out the mortgage for more years. Still others choose to refinance to consolidate debt. Although the reasons vary, the concept of a refinance is basically the same. You are applying for another mortgage to pay off your existing mortgage.
Many people are afraid to refinance. There are still thousands of people in the United States who have mortgage rates that are at least two percent higher than the current rate who refuse to look into refinancing their homes. They feel that it is a hassle and not worth the trouble. In many cases, it is well worth the trouble and no more of a hassle than when you first applied for your original mortgage.
If you are seeking to refinance your current mortgage, you should shop around for the best mortgage rates. Because the housing market is currently at rock bottom, mortgage lenders are eager to make loans to existing homeowners in order to maintain their business. There are many different attractive offers out there for those who wish to refinance. Many companies are offering no fee refinancing which means that there is no charge for title examination, application or a credit check. If you have more than twenty percent equity in your home, you can choose a “no doc” refinancing package which means that you do not have to supply the lender with any documentation such as employment verification or income tax returns.
You are most likely better off to seek out other lenders for competitive rates on your refinance. Your current lender will reserve their best packages and rates for new customers and will not offer you the best interest rate or package available. To get the best rate, it will be necessary to contact a few different lenders who will be eager to procure your business. Your current lender has absolutely no incentive to make you a better offer on your existing mortgage. Mortgage lenders make money on interest paid and fees. There is no reason for your current lender to want to reduce your interest rate and cut their own profits. For this reason, it is wise to shop around and away from your current lender.
Once your refinance is approved, the new lending company will pay off your existing mortgage. The existing mortgage is released and the release is recorded on your property as is the new note owed on your refinanced mortgage. Depending upon your refinance company, you may be liable for the recording fees which vary from state to state.
After your refinance is completed, you will then make your monthly mortgage payments to your new lender instead of your old lender. If you escrowed your taxes and homeowner insurance, you will probably get a check from your old lender for the amount of money in your escrow account if this was not included in the payoff amount. Any points or fees that you incurred for your refinance are tax deductible. If you are unsure about what types of fees you can deduct off your income taxes, you should have your taxes prepared by someone who is familiar with dedicating mortgage and refinance fees.
A refinance is not a difficult task to accomplish. It is relatively simple and the rewards can add up. In this book we will discuss different reasons why you should refinance as well as different methods of refinancing. We will also give you a case study on a typical refinance customer and how this customer saved quite a bit of money by choosing to refinance their home. We will also be looking at refinancing debt other than home debt. By reading this book, you should be able to ascertain whether refinancing is the right choice for you at this moment.