You've already settled into your home and paid off a significant chunk of your mortgage. As the years have passed, however, your financial needs have changed to the extent of forcing you to reassess the situation. You're not alone here -- in fact, this happens to be the main reason why most homeowners refinance their real estate loans Brooklyn New York. Depending on your circumstances, there are 2 basic types of refinancing arrangements you could choose from:
Rate-and-term Refinance: This is by far the most common type of refinance. Simply put, it involves switching to a mortgage that has better terms and/or a lower interest rate. It's worth noting that with the exception of loan fees, money hardly ever changes hands in this case.
Cash-Out Refinance: As the name suggests, this involves borrowing more money on top of the existing mortgage. It's thus fair to say that this is a way of converting equity into cash. There's nothing wrong with that per se, but it's what makes cash-out loans be priced higher than other 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.
Application: Take note that it's only after a successful comparison that you should start filling out applications. It's here that you'll be asked to provide more financial details, plus documents to support them. The more prepared you are in this regard, the faster your application will proceed.
Lock in Your Rate: Most applications take 30-60 days to go from processing to approval. For this reason, experts recommend acting quickly to lock in your terms while they're still available. Otherwise, your rate will remain exposed to market shifts throughout this period.
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 is by far the most common type of refinance. Simply put, it involves switching to a mortgage that has better terms and/or a lower interest rate. It's worth noting that with the exception of loan fees, money hardly ever changes hands in this case.
Cash-Out Refinance: As the name suggests, this involves borrowing more money on top of the existing mortgage. It's thus fair to say that this is a way of converting equity into cash. There's nothing wrong with that per se, but it's what makes cash-out loans be priced higher than other 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.
Application: Take note that it's only after a successful comparison that you should start filling out applications. It's here that you'll be asked to provide more financial details, plus documents to support them. The more prepared you are in this regard, the faster your application will proceed.
Lock in Your Rate: Most applications take 30-60 days to go from processing to approval. For this reason, experts recommend acting quickly to lock in your terms while they're still available. Otherwise, your rate will remain exposed to market shifts throughout this period.
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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