The process of refinancing is simply that of financing something… again. However, this new process comes with establishing a new loan that now has a better term of interest as well as a lower rate of interest.
Refinancing a mortgage focuses on the process of applying for a new loan. What many people aren’t aware of is that refinancing means that the old loan is being paid off in full by obtaining a new loan. The new loan will come with all new terms, so a lender will have to obtain and present specific information and documentation to in order to verify that the requested refinance can be qualified for.
The following information will be checked when applying for a refinance:
- Appraisal to determine the current value of the home to be refinanced.
- Assets such as retirement, stock, savings accounts, and 401K investments.
- Credit score and payment history.
- Income and employment history.
People refinance their mortgage rates for a number of reasons, such as to the advantage of lower mortgage rates. The average national mortgage rates can hit “lows” over time that make it an ideal moment to latch onto these rates. Even with little equity or in instances where a person is “underwater” on their mortgage, there are still special refinance programs to take advantage of and lower a mortgage rate significantly.
Refinancing works ideally for those that wish to lower a monthly mortgage payment and offset the costs of refinancing within a reasonable time frame. For those that meet the criteria of refinancing, there are plenty of appealing options available.