Do you know refinancing a mortgage can result in bing savings?
You might be wondering how? Actually, refinancing relatively reduces the mortgage rate and you can estimate more predictable costs. However, there are certain misconceptions about refinancing that you should overlook while making a decision to refinance your property.
Let’s have a look at the most common misconception about refinancing your mortgage.
1. Anyone with an existing mortgage can refinance
Another misconception is that anyone with an existing mortgage can qualify for a refinance. This belief makes sense in theory, particularly if a borrower never missed a mortgage payment. But refinancing produces a completely new mortgage with new terms. And this new mortgage is not associated with the old one.
You ought to submit a new mortgage loan application and go through the approval process once again. Whether you are refinancing with the same lender, refinancing will result in lower monthly payments. There is an underwriting process where the bank re-evaluates your income and credit to proceed with the mortgage. If you are earning less money today or if your credit score has dropped numerous points since applying for the last mortgage, both factors influence qualifying for a refinance.
2. Refinance can be executed without spending money
You may have noticed the advertisement of no-cost refinancing, but there is no such thing as a true zero-cost refinance. Almost every lender charges a fee for originating a mortgage along with other charges such as the attorney’s fees, title search fees, appraisals, etc. Seldom, a lender includes closing costs in the mortgage balance. Even some of the banks charge borrowers a somewhat higher mortgage rate to comprise the closing costs. Although you do not pay much out-of-pocket in these circumstances, you are still paying for the refinance.
3. Higher equity is required to qualify for a refinance
In the past, refinancing a mortgage loan demanded some serious equity, and banks would not give you the time of day unless you owned an 80% loan-to-value ratio. The state is quite different these days and many lenders will refinance your mortgage with as limited as 3% to 5% equity. The homeowners who qualify under the Home Affordable Refinance Program are able to refinance up to 125% of their house’s value. This improves underwater borrowers to take benefit of lower interest rates.
4. Refinancing will reduce the cost of your property
Mostly, people refinance with an aim to lower their housing costs and save money each month. But, there is no guarantee that refinancing will decrease the cost. Actually, it depends on the way you refinance the mortgage. When you refinance with the sole idea of getting a lower interest rate, and you do not cash out the equity, you can probably walk away with a lower monthly payment. A cash-out refinance allows borrowing money from your equity. Thus, you can use the money for debt consolidation, home improvement, and other purposes.
5. Only one mortgage quote is enough
Most of the time, people only consider one mortgage quote and proceed further which should be avoided. Comparing various loan options is essential while applying for refinancing. In fact, you should compare the lenders such as local banks, online lenders, and mortgage bankers. This will give you an overview of how the lenders are processing and the current market rates. Also, with the comparative analysis, you might end up with the least expensive option.
6. Wait for the lower rates while refinancing
Previously, it has been suggested to wait for the refinancing until the mortgage rates are dropped. The 2% per cent rule, though, it is obsolete in today’s scenario. The decision to refinance should be circumscribed by your cost savings and the duration you are planning to access the property. For instance, rather than waiting for the lower rate make a plan to live in the house for a long term which is a cost-effective solution while refinancing a mortgage.
So, when you require to refinance a mortgage do not get trapped into these misconceptions. Analyze the requirements and connect with the right mortgage services provider to complete the mortgage successfully. ScaleUpYourTeam is one of the top mortgage services providers that support with all mortgage refinancing procedures. From pre-processing to closing support, the company cover entire mortgage processing to deliver you the successful results.
Let’s talk to find out the best option to refinance your mortgage, and make it a hassle-free process!