When you refinance, you get a new mortgage to pay off your existing mortgage. Refinancing works just like getting a mortgage to buy a house. Unlike Purchase, You typically have until midnight of the third business day after your loan closes to cancel the transaction (Primary Residence).
While refinancing can be a good option in some cases, it isn’t right for everyone. Here are some possible reasons to refinance your mortgage:
You can lower your monthly mortgage payment by reducing your interest rate or increasing your loan term to better cash flow.
You can reduce your long-run interest costs through a lower rate, shorter loan term or both.
You can get rid of mortgage insurance.
Cash out to build or start a Business, Purchase an investment property or update your Real Estate holdings etc.
Switch from an ARM product to Fixed Rate Mortgage.
As you weigh your options, be sure to consider the closing costs that will come with refinancing. For example, these could include the origination fee, appraisal fee, title insurance fee and credit report fee. Closing costs vary by the State and Lender can pay part or all of it. Reach out to a FDM Professional to explore options.
You’ll also need to know the loan’s closing costs to calculate the break-even point where your savings from a lower interest rate exceed your closing costs. Once again, a FDM professional can run these numbers for you.
FHA and VA Loans also offer a streamline option removing the need for income documents and an appraisal while taking advantage of lower rates.