Chances are you have heard someone you know mention that they “refinanced their mortgage” or did a “refi” on their home loan. If you aren’t familiar with the refinancing process and have never done it before, you probably have a lot of questions. We’ll break down the basics and walk you through some reasons why refinancing might be beneficial for you.
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1. What is refinancing?
When you refinance your home, you are effectively trading in your old mortgage agreement for a new one. You can do this with your original mortgage lender or a different one. When you refinance, you often agree to a new principal and interest rate, and the lender refinancing your loan uses the transaction to pay off your previous mortgage. There are two main types of refinances: no-cash out and cash out.
2. Why do people refinance?
The most common reason to refinance is to lower your interest rate, but there are so many things you can do if you choose to turn your home equity into cash. Here are some common reasons why people choose to refinance their mortgage:
- Removing a co-signer from the mortgage agreement (for example, in the case of divorce)
- Getting a different type of loan (perhaps switching from an FHA loan to a Conventional loan)
- Switching to a lower interest rate
- Changing the term of the loan to pay it off faster (for example, reducing your loan from a 30-year to a 15-year agreement)
- Turning your home’s equity into cash (maybe for home improvements or to pay for a large purchase)
3. When can you refinance?
The answer is, it depends. Some mortgages require a period of time to pass before you can refinance, while others allow you to do so immediately. It just depends on your lender and the type of loan you have. This article from NerdWallet gives a good general outline of the rules surrounding refinancing. It’s always a good idea to get in touch with the mortgage company servicing your loan to understand the specifics of when you are allowed to go through the refinancing process.
4. How Do you refinance?
The process of refinancing will look slightly different depending on who you are refinancing with and what kind of refinance you are doing. In a lot of ways, refinancing is similar to the process you went through when obtaining the original mortgage on your home. Intuit has an awesome article that outlines the basic process of a refinance. If you want to know more, contact us to get your questions answered.
Have questions about refinancing?
It may make you feel better to know that refinancing is an option when you are purchasing your home. Let’s face it, it’s a huge purchase. It may be a comfort to know that the interest rate you buy your home at doesn’t have to be the rate you pay forever. That means you don’t need to limit yourself to only purchasing a home when rates are low. Learn more reasons about why you should house hunt when rates are high.
If you are considering refinancing your mortgage, it is a good idea to speak with an experienced Loan Officer who can help you explore your options. Contact us to get in touch with a Loan Officer or visit our refinance page to learn more.
Why Choose FBC Mortgage?
FBC Mortgage, LLC is a leader in helping home buyers with fast and simple loans. We’re dedicated to exceptional customer service and are always available when you need us most, even at night and on the weekend. We’ll help you navigate your new home purchase, and keep you updated along the way with weekly check ins, so you know you’re taken care of. That’s one of the many reasons why 95% of our clients would recommend us to their friends and family. It’s also why the nation’s top home builders and Realtors trust FBC to help their new home buyers.
Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At FBC Mortgage, LLC, we’re dedicated to helping home buyers finance their dream home.
All information presented is for educational purposes only and not intended as financial advice. FBC Mortgage, LLC is a national mortgage lender headquartered in Orlando, Florida. Specializing in residential mortgage lending, including purchase, refinance, construction, and renovation loans. See what our clients have to say. NMLS#152859 EHL ©2023.
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