Understanding Financing Terms

Tips To Help You During Your Upcoming Home Mortgage Refinance

The chance to refinance your home mortgage is a great way to reduce your interest rate, pay off outstanding debt, and use your home's equity for a selected purpose. And with the available lower rates in today's market and home values increasing in many parts of the country, now is a great time to do so. Here are some tips to help you know what to expect during your upcoming home mortgage refinance process.

Recognize the Refinance Benefits

There are several benefits of refinancing your mortgage, and depending on your situation and your needs, you may qualify to do so and benefit from one or more of the following. First off, refinancing your home mortgage into a shorter-term mortgage will help you pay off your mortgage sooner. For example, if you have been paying on your mortgage for several years, you can refinance the mortgage from its current 30-year mortgage to a 15-year mortgage. Your payment may increase a bit, but your loan will have much fewer remaining payments. 

Another great reason is to help you eliminate your private mortgage insurance (PMI). If your home's equity has increased, when you refinance your mortgage, chances are great your loan to value will be less than the required 80 percent and you won't have to pay PMI on your new mortgage. You can also tap into your equity with a refinance, which will give you the home equity to put toward needed home repairs or updating, such as a new roof, or you can use it to pay off unsecured debt or take a vacation.

If your current mortgage is on an adjustable-rate, you can refinance to lock in your mortgage rate to something fixed. Fixed interest rates on 30- and 15-year mortgages are very low and quite competitive, and this provides you an opportunity to lock in at a fixed rate and save thousands of dollars on your mortgage interest.

Prepare For the Process

As you prepare for the mortgage refinance process, be sure you collect some essential information and documentation. Your mortgage lender is going to need some information from you and proof of income and your most recent tax documents, so collect the past few months of your paycheck stubs, either physical or electronic copies, that you can submit to your mortgage and the underwriter. Also be sure you provide your credit application, which will include your credit file or approval for your mortgage broker to view it.

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