What Does it Mean to Refinance Your Home?
There are many steps in the process of refinancing a home. Learning how to refinance your house is a great way to save money on high mortgage payments and let’s face it, who doesn’t want to save money? There are a variety of reasons why homeowners decide to refinance, whether it be to save the extra cash or to take advantage of the constantly changing rates in the market. Here is a basic breakdown of what it means to refinance your home:
What Does Refinance Even Mean?
To put it simply, refinancing means you are trading in your old loan for a new one. When you are paying a mortgage on a house, you have borrowed money from a lender to then pay it back every month. When you decide to refinance your mortgage, the new home loan will pay off the existing debt and instate a new loan agreement. Mortgage refinancing can allow you to borrow funds at a more favorable current interest rate and repay the funds over a different amount of time.
The Two Main Types of Refinancing
Rate and Term Refinance
There are two main types of refinancing when it comes to your new mortgage. The first is called ‘rate and term’ refinance, which is an improvement to the interest rate and/or change to the term (number of years you have to pay off the debt). In this type of refinance, there would typically be a smaller interest rate along with potentially shorter payment terms. A rate and term refinance would not make changes to the outstanding balance, except to perhaps cover closing costs as desired, but would have the goal of securing a better interest rate and/or loan term. Along with lowering your monthly payment, a rate and term refinance could potentially build equity in your home faster and perhaps eliminate mortgage insurance.
Cash-Out Refinance
A cash-out refinance replaces your current home loan with a new, larger loan. The difference between cash-out refinance and rate and term finance is the amount of cash you withdraw from the total equity in your home. Each time you make a monthly payment you own a bit more of your home, gaining you a bit more equity. Cash-out allows you to convert home equity into cash. When you refinance this way, you take out a new mortgage for more than your previous one, and the difference is paid to you in cash, hence the name ‘cash-out.’
How to Refinance Your Home
1. Prep for your mortgage refinance
Prepare for your refinancing goals by gathering important information that may be useful in the process. Check up on your credit score. Your credit score will affect the interest rate provided by lenders so it is important to know. You are also going to want to consider how much equity you currently have in your home. In general, the more equity you have the better your interest rate will be.
2. Ask questions
Consider your financial goals. Ask questions like: Which mortgage refinance programs do you offer? How much do I qualify for? How much equity do I need? Will I need a home appraisal?
3. Review interest rate and loan term options
Interest rates can change by the day, so once you find your ideal rate it is best to secure it as soon as possible. You can get an instant quote rate in just 60 seconds by clicking here.
4. Submit you loan application and provide needed income/asset documentation
Utilizing a secure online application system, you can provide all of the details and documentation needed, along with authorization to have credit pulled and your loan submitted to underwriting.
5. Close on your new home
Once all the details are finalized, you will sign new loan documents, which can be done at your convenience and location of choice. Once this process is through, your old loan will be paid in full by your new lender!
Catlin Capital Can Help You Refinance Today
Now that you know more about the process of refinancing your home and what it means, you can get started on refinancing today with the help of Catlin Capital. Deciding to refinance your mortgage is a big decision, and you want it to be done right. Catlin Capital is here to guide you through your refinancing options and ensure you are saving the most money in the process.
