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At a time when mortgage rates predictions are for higher rates in the future, it can be profitable to look into refinancing procedures. Refinancing a mortgage at a lower interest rate is often a valuable investment of time, and you want to be set for the difficult economic period ahead. Plan to stay in the same house for at least 10 years, to maximise the benefits from refinancing while mortgage rates are at historic lows.
While the process of refinancing in general are pretty much the same under all circumstances, there are always variations, depending on where you borrow your funds, and who holds your current loans. As a borrower, it is desirable that you understand the process of refinancing.
Make sure you have a clear idea of your goals for refinancing. Will you be looking to lower your monthly payments, shorten the length of your loan, or consolidate other debts into your mortgage?
A crucial step in refinancing your home is determining the value of your home as collateral. Unfortunately, in some parts of the country the valuations and selling prices of homes have been falling. The mortgage lender who will provide your new mortgage will decide on the value of your home for lending purposes.
This valuation may be lower than you think it should be, or even lower than the amount you want to borrow. In this case, you may need to rethink whether to go on with the rest of the process of refinancing. If there is a shortfall between the amount your new lender is willing to advance, and the amount you need to pay off the existing mortgages, then you may need to find an alternative to refinancing your home.
If the valuation comes back at an acceptable level, then you can proceed with the rest of the process of refinancing.
The next step is to complete the application. You will need to provide your new lender with documentation showing your income and expenses, and also showing the current mortgage or mortgages, and what is owing on them. Don’t try to hide it if you have missed a payment on your current mortgage - be forthright with your new lender or you could end up in much worse trouble when the truth comes out.
Your new lender will do a credit check, and advise you of a settlement date. That is the day when the old mortgage or mortgages will be paid out, and your new mortgage will begin.
You can use a good loan mortgage calculator to calculate the amount of your new monthly mortgage payment, to see how much you will be saving once the new mortgage kicks in.
There is nothing too complicated about the process of refinancing, but if you don’t like this type of task, you may feel challenged anyway! Many people find the process of refinancing stressful, but if you have chosen wisely you will gain great benefits. Given that mortgage interest rates predictions are heading upwards, you may be a lot better placed financially.
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