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What You Should Know About Refinancing A Mortgage

17 March 2020

April George

Refinancing is an event that homeowners choose when they want to replace their mortgage loans. If you are thinking about refinancing, you should start by making sure it is a good idea. Next, you should learn about what it is and how it works. Here are some details about it to help you know when to do it and how it works.

Reasons to Refinance

Before you call a lender to find out about refinancing your loan, you should make sure it is a good idea for your situation. Here are some reasons people choose to refinance:

• They are paying an interest rate that is too high, so they refinance to obtain a lower rate.
• They want to shorten their loan by taking out a new mortgage with fewer years.
• They want to take cash out of the equity they built up over the years, so they take a cash-out refinance.

People also choose to refinance for many other reasons. If you are not sure if you have a good reason, talk to a mortgage company. They can help you analyze your situation to make the right choice.

What Refinancing Does

When you refinance, several things happen. One, a mortgage lender runs your credit and evaluates your financial situation to determine if you meet the criteria. If so, the lender approves the loan and issues you a brand-new mortgage.

The money from the new loan first pays off the balance owed on the original loan. If there is money left from the proceeds, you get to keep it. You then have a new loan with a different payment amount that you must start paying.

Steps That Occur in the Process

There are several steps that must take place when you refinance your mortgage. One of the most important is an appraisal. Lenders cannot approve and close on refinances without ensuring that a home is worth the right amount. Next, the lender will perform other steps that are necessary for closing on a loan. One of these is performing title work. They will want to know that the title is free and clear before issuing you the loan. There may be other steps as well, and your lender can help you learn more about these before you close on it.

Refinancing is something that can be extremely helpful to homeowners. If you believe this is a smart move for you, talk to a lender to learn more about what to expect in the process.

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