How Does A Refinance Mortgage Work For You?
Refinancing a mortgage means that you are applying for a new loan to replace your existing mortgage loan. The choice to refinance a mortgage will likely be motivated by lowered mortgage rates, meaning the new loan will be more favorable and align with your personal and financial goals.
This newly refinanced mortgage could offer financial stability, cash flow for other expenses, a shorter loan term and/or eliminating mortgage insurance.
Should I Refinance My Mortgage?
Depending on your goals, refinancing a mortgage can be the right decision. If you are looking to shorten your loan term, free up capital through a cash-out refinance, lower your monthly payment or move from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, refinancing may be the best choice for you. Homeowners should also plan to stay in their home for an extended period of time if they are going to go through a refinancing.
There will be costs associated when refinancing your mortgage that you will have to be prepared for, such as closing costs and other fees, some of which can be rolled into your loan.
The interest rate at the time of the refinancing can save you a significant amount of money, so choosing the right time to refinance is essential. A good mortgage refinancing rule of thumb is to refinance when you can decrease your rate by a full percent.
H2: What Are The Top Reasons To Refinance Your Home?
There are a number of reasons to refinance your home, including:
Decreasing monthly mortgage payments with a lower-fixed rate.
Accessing higher monthly cash flow for other expenses.
Switching from an ARM to a fixed-rate mortgage eliminating variable rates.
Benefiting from equity you’ve earned in your home to pay for home improvements, education or debt consolidation.
Reducing the term of the loan to save money on interest in the long run.
Eliminating PMI payments incurred from a smaller down payment at the time of original home purchase.
A mortgage refinance calculator can help you determine what your payments will be if you do a mortgage refinance.
How Soon Can I Refinance After Purchase?
Typically, the amount of time after purchase you have to wait to refinance depends on the lender. Most lenders will base your ability to refinance on the amount of equity you have your home, rather than the length of time you’ve owned the home. Speaking with an experienced loan originator like Mutual of Omaha, can be the best way to discover when a mortgage refinance is right for you.
However, there can be reasons to refinance within 6 months of purchase, including a steep drop in interest rates, change in marital status, significantly improved credit score, or a need to switch from a 15-year mortgage to a 30-year mortgage, or from an ARM to a fixed rate. Unless you paid cash for your home, it is often in your best interest to wait six months before refinancing.
What Is The Timeline For Refinancing?
The refinance process timeline will vary depending on the lender and how quickly you are able to provide documentation. Applying, processing, underwriting and eventual approval can take 30-90 days.
How Soon Can I Refinance After Refinancing?
When refinancing a mortgage, if you plan to do a cash-out refi, lenders may suggest waiting six months between mortgage refinances. Cash-out refinancing is a loan that pays off your mortgage, and a cash out refi can be for more than your existing loan allowing you to use the difference towards home renovations or other expenses. You must have significant home equity in order to do a cash-out mortgage refinancing.
Rate-and-term refinancing, which is done to get access to more favorable interest rates or negotiate better terms, can be done as many times as it makes sense for your personal financial situation.