Do you wish to leverage your investment in residential real estate? You have landed at the right place!! Refinancing is the best possible solution to do this! There are several reasons due to which individuals choose to refinance their mortgage, including lowering their interest rates, getting cash from the property, shortening the loan term, and much more. Before diving deeper, let us understand more about mortgage refinancing.
What is home loan refinancing?
Individuals reading this must be wondering what actually is mortgage refinancing and when to refinance your home. Refinancing simply implies trading your current mortgage for a newer one with different Loan terms. The newer mortgage is used to pay the debt of the previous one, and the borrower is left with just one loan and a single monthly payment.
What is the working of mortgage refinancing?
Home loan refinancing is usually a less complicated process than the home buying process. The borrowers usually prefer to use the refinance mortgage payment calculator from Preferred Rate to determine if refinancing is the right decision or not. The time to get the final approval and disbursal may roughly take 30-45 days. Here are the home loan refinancing steps:
The first step of mortgage refining is to figure out the options suitable for your needs. When you apply for refinancing, your lender enquires about the same information as earlier, including sources of income, assets, debt and credit score, etc., to determine whether you are eligible for home loan refinancing or not. Here is the list of essential documents required by the lenders to confirm whether you will be able to repay the loan amount or not.
- Most recent pay stubs(2)
- Most recent W-2s(2)
- Most recent bank statements
- Credit report
- Tax returns
- Spouse documents(only if applicable)
Individuals who wonder whether they have to connect with the same lender for mortgage refinancing shall be assured that is not the case. You can also choose a different lender who can pay off your current loan and disconnect your dealings with the previous lender. Therefore, it is essential to explore the market and get in touch with a suitable lender to receive the best deals.
Locking Interest Rate
After getting the approval, the borrowers are given the option to lock their interest rates to avoid fluctuations before the loan closes. The locking period is usually 15-60 days and also depends on certain factors like location, loan type and lender. The borrowers are also given the option to float their rate, which implies not locking the interest rates before proceeding with the loan. This helps borrowers to get lower interest rates.
After the submission of the loan refinances application, the underwriting process begins. During underwriting, the lender verifies your financial information to ensure the accuracy of your document proofs.
Once the underwriting is completed, it is time for loan closing and disbursal. The lender will send a closing disclosure document to the borrower indicating the final numbers of the loan.
Check the additional costs involved with the home loan process before making the final decision!