Whether you’ve changed jobs or your family has grown since you first purchased your home, you may discover that your mortgage no longer fits your financial needs. Instead of tackling the lengthy process of selling your home and finding a new one, consider refinancing it.
Refinancing sounds fairly simple: You apply for a new home loan, which pays off your original one and leaves you with just one loan and payment. However, much like buying a home, refinancing one is a big decision—and it depends on a lot of different factors that could cause you to lose money if you don’t make the right refi decisions.
Wondering if you should refinance your home? Discover if it’s the right choice for you and your family with Landmark National Bank.
Benefits of Refinancing
While there’s a wide variety of factors that go into refinancing, there are many benefits to choosing this option for your home. By refinancing, you can make certain adjustments to your mortgage that fit your budget, such as lower interest rates or shortening the term of your mortgage.
Want to learn more about the benefits of refinancing? Contact Landmark National Bank’s lending experts— they’d be happy to answer any questions you may have about refinancing.
Lower Interest Rates and Smaller Payments
The most common benefit of a refi is receiving a lower interest rate for your loan payments, so you can stay in the home you love without hurting your finances. In addition to a lower interest rate, you may be able to shrink monthly payments for your mortgage. This can provide a much-needed break for your budget.
Shorter Term Length
If you’re considering moving to a new home in a few years, refinancing can also help you shorten the term for your mortgage. If you currently have a 30-year mortgage, you could refinance for a 15-year mortgage, which can lower your interest rate but increase your monthly payments.
Switching to an ARM or Fixed-Rate Mortgage
Whether you chose an adjustable-rate mortgage (ARM) or a fixed-rate mortgage when you first bought your house, it may no longer fit your plans for the future. If you’re rethinking your choice of mortgage, refinancing your home lets you switch to a more manageable option for your current lifestyle or situation.
Factors to Consider Before Refinancing
Before diving into refinancing your home, it’s crucial to calculate the factors of refinancing. If your credit score is less-than-thriving, for example, you may find yourself struggling to get your refinancing plans off of the ground.
Luckily, many factors of refinancing your home reflect the factors of buying a home. When you apply for a refi, these are some things you should consider:
- Home Equity – If you have little to no home equity, refinancing with a conventional loan can be difficult. However, you can refinance with a federal housing administration (FHA) loan even if you have no equity. In addition, if you’re a veteran and your previous mortgage was a VA loan, you will also qualify for an Interest Rate Reduction Refinance Loan (IRRRL), or a VA streamline.
- Credit Score – Credit score requirements vary by lender and your type of mortgage. In general, you’ll need a credit score of 640 or higher for a conventional mortgage refinance. Most lenders currently require a credit score of 660 or higher for government programs.
- Refinancing Costs – Just like when you purchased your first home, refinancing includes closing costs. From appraisal fees to title fees, expect your home refinance to range from 2% to 6% of your loan amount. Prior to refinancing, it’s important to see how much you will owe in closing costs compared to how much the refinance will save you over time.
What to Expect During the Refinancing Process
Once you’ve looked over the financial factors of applying to refinance, it’s time to get the ball rolling. Refinancing shares some similarities with buying a home, but it’s typically far less complicated. When you’re ready to refinance, you can expect these general steps in the process:
Applying for a Refi
When you’re ready to start the process of refinancing, you’ll apply for a loan with your lender, who will review your income, assets, and other financial information before approving it.
Locking in Your Rate
You’ll have the option to lock your new interest rate to keep it from changing during the process. Rate locks can last between 15 to 90 days.
Beginning Underwriting with Your Lender
During the underwriting process, your lender will verify your provided financial information before taking the refinancing process further. Additionally, they will have a licensed appraiser visit your home to appraise its value.
Closing the Deal
After they’ve completed underwriting, your lender will send you an initial closing disclosure, which contains the numbers for your new loan. After reviewing the details, you’ll sign the document and return it to your lender. Generally, three business days later, you will sign all your official closing documents. Remember, when refinancing your primary residence, it is a federal law to allow you an additional three business days to ensure this loan is right for you. If not, you have the right to cancel the transaction during the three-day rescission period.
Landmark Can Help You Refinance Your Home
If you believe refinancing your home is the best option for you and your family, Landmark National Bank can help you chart this new territory. As one of the top lenders in Kansas, our team of home loan specialists is dedicated to helping you find the refinancing solution that best fits your needs.
We know how valuable your time and money is to you, which is why we always strive to keep costs low and make the refinancing process as easy as possible. Discover how Landmark can help you plan for the future of your home today.