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Now Is the Time to Refinance A Home

Mortgage rates are at historic lows that haven’t been seen since the 1950’s. Now is the perfect time for a homeowner to refinance their home and potentially save hundreds on their monthly payments. Mortgage rates are already beginning to rise, so if a homeowner has been considering refinancing, now is the time to do so.

What Is Refinancing?

Refinancing a home is when a homeowner gets a new, better rate mortgage to replace their old mortgage. The must be appraised before a new mortgage can be issued, and the homeowner’s credit history will be scrutinized.

A homeowner may choose to refinance if interest rates are lower today than when he purchased his home. A lower interest rate will reduce his monthly mortgage payments. He or she may also refinance into a standard, fixed rate loan if their original mortgage had an adjustable rate.

Another reason someone may refinance is to reduce the length of the loan. This will allow them to pay the house off quicker, and pay less interest in the long run.

Before refinancing, a homeowner must consider how long they will be living in their home. If they don’t intend on being there for more than a few years, the refinancing charges may be higher than the money they save and they won’t break even within the time frame. Experts recommend that someone should plan on living in their house at least another two years if they are considering refinancing. Otherwise, the money saved won’t cancel out the money spent on refinancing the home to begin with.

How Does One Refinance A Home?

Before refinancing, a homeowner must make sure that their finances and credit are in order. They should be aware of their current credit score. If their credit is poor, they should work on improving their score before applying because their credit score affects the interest rate a bank will offer them. Refinancing rates should be extensively researched online to make sure one is getting the best deal. When choosing a bank or mortgage broker, research the company thoroughly and get all quotes in writing. A buyer should pay very close attention to the terms of agreement, points, and fees associated with each refinancing offer they receive.

In order to refinance, a buyer will have to provide a proof of income. This proves that they can pay for the new mortgage and includes things like bank statements or pay stubs. They may also have to prove they have sufficient homeowner’s insurance on the property.

Banks may also ask for W-2 forms to verify the applicant’s employment history and copies of any asset information they have, including savings, checking, and investment accounts.

Lastly, the bank will need a copy of title insurance in order to verify the names on the title and the description of the property.

The bank or mortgage broker will help a buyer through the refinancing process, doing things like telling them if they need a property appraisal and helping them get all necessary paperwork handled. A buyer should read the documents carefully before signing.

The appraisal process should take 2-4 weeks if an applicant has all of their documentation in order when they apply for refinancing.

Refinancing a home can be a great financial decision for a homeowner to make. Before they go ahead and call up the bank, however, they should have a clear idea of their financial situation, financial goals, and true reasons for refinancing their mortgage. They should be planning on living in the home for at least several more years. Working with a reliable bank is important too. The bank should be helpful, and never make a homeowner feel pressured to sign anything before they are ready. With a little bit of research and good timing, refinancing can save a homeowner hundreds of dollars each month.

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