If you are a homeowner here in Fort Lauderdale—or anywhere else in the country, for that matter—you may have come across the term “refinancing.” It may surface in conversation, or you may hear people discussing it when interest rates drop. Refinancing your home can be a very effective financial tool that allows you to improve the terms of your mortgage, lower your interest rates, or even gain access to the equity you have accumulated over time. Before you can take advantage of the things we have brought up, it is essential to understand what it means when you refinance your home. To help you with this process, we will explain why people do this and what you should think about before committing to it.
What is Refinancing?
Refinancing refers to replacing your existing mortgage with a new one. In the opening section, we mentioned some of the benefits of refinancing, such as lower rates. Generally, after homeowners complete the process, they are left with more favorable terms and conditions that benefit them financially. To “replace” your mortgage with a new one, it has to be paid off. Your new lender will do this as part of the refinance process.
However, because you will be working with a new lender, you can renegotiate the terms of your new mortgage that align with your current financial goals. Before we go into the next section about the factors contributing to your decision, here is a list of reasons why people do it.
Lower interest rates could save significant amounts of money over the life of your loan.
You can effectively reduce your monthly payments by extending the loan term or getting a lower interest rate.
Although we just mentioned you can extend your loan, you can also shorten it. Going from a 30-year mortgage to a 15-year will likely result in higher monthly payments, but you will pay less interest. Additionally, you will pay off your mortgage in less time.
Cash-out refinancing gives you access to your home equity. Essentially, you are borrowing against your equity, which can provide money to make home improvements, pay off debts, and use toward any other financial need.
What It Looks Like
The first thing to consider is whether this aligns with your long-term financial goals. Secondly, it is imperative to highlight that refinancing is similar to the original process you underwent to secure the original loan. This, unfortunately, includes several elements.
Finding a new lender
Prequalifying for the loan through an application process
Home appraisal
Underwriting and final loan approval
Closing the loan (which includes closing costs and fees)
Loan funding and repayment
Before your loan can be approved, the new lender is going to evaluate your credit score, assess your financial situation, income stability, and your debt-to-income ratio. These are critical things to look at before seeking a new loan because they impact your eligibility and terms.
Get in Touch with Spectrum Title Services, LLC
Regardless of your reasons for refinancing, we work closely with borrowers, lenders, mortgage brokers, and other professionals in South Florida. To learn more about whether refinancing is right for you, reach out to us so we can help. We can provide you with an estimate of your closing costs and other associated fees so that you can make the right decision for you. Contact us today to set up a convenient time for us to speak.