When it comes to homeownership, there are many ways for an individual to own a home. They can buy a house in cash or even buy it through a loan. Buying a house through a loan is what is known as a mortgage. When you buy a home through a mortgage, it means that you will be buying the house through a long-term loan offered by mortgage companies. If one has a problem with their mortgage repayments, they can refinance into a lower interest rate mortgage so that they repay the earlier loan with a fresh loan. This is what is known as mortgage refinancing.
What do home refinancing companies do?
Mortgage refinancing companies exist to buy old mortgages for newer ones. This is a case of trading the old mortgage for a new one so that the client can get lower repayment rates or so they can get better mortgage rates. Mortgage refinance companies can be stand-alone financial institutions or banks and other lenders that choose to offer this service.
Why should one refinance their mortgage?
One of the reasons one may want to refinance their mortgage is so that they can shorten their old mortgage repayment period. In the process, one gets to lower the interest rate paid on the mortgage. One may also take advantage of mortgage refinancing and turn some of the equity they have earned from the old mortgage into cash.
There are two types of mortgage refinance you may be interested to know. These are:
1. Rate and Term Refinance
In this kind of mortgage refinance, you will typically get a refinanced mortgage with a shorter repayment period and a lower interest rate. You could for instance change the older mortgage from 20 to 10 years. Since the interest rates sometimes go lower, refinancing a 30-year mortgage may give you better headroom and a lower interest rate, meaning you could repay the mortgage in 20 years and at the same interest rate as the older mortgage.
2. Cash-Out Refinance
A cash-out refinance, means that you will get cash from the refinance deal. Therefore, instead of getting a lower interest rate, you cash out the excess money on the newer mortgage. Say your home is worth $100, 000 and you owe $60,000, your lender could give you something like $20, 000 as a qualified borrower. Therefore, you cash out $20, 000 to sort out any financial needs you may have.
Tips to choose the best home refinancing companies
So, you have done your math and realized you can make some savings through a mortgage refinance. What should you consider when choosing a mortgage refinance company? We shall consider some of these factors here:
1. Finding the Right Lender
Some of the institutions that offer mortgage refinance are credit unions and banks. However, these are not the only institutions that can help you with mortgage refinancing. You may also want to consider others such as savings and loan companies, specialized lending firms, and consumer finance companies. In choosing any of these lenders, you should consider their mortgage refinance rates and make the right choice.
2. Mortgage Brokers and Loan Officers
Loan officers and mortgage brokers represent the banks and other lenders. As such, when dealing with these people, you may not be getting the best offers. Mortgage brokers may be of help to you as they compare the rates offered by mortgage refinancing companies. Even though they are paid for these services, you may want to consider them to help you find the best refinancing lenders.
3. Consider the Cost of the various lenders
You should consider the cost of refinancing your mortgage with various lenders. What are the new interest rates? How much money will you save from the mortgage refinance? What are the associated fees? Your mortgage broker can help you break down the costs of refinancing your mortgage and help you choose the best lenders. In the event you need to cash out, what is the amount you will get? Consider the Good Faith Estimates that are provided by the various lenders. With this information at hand, it should be easy for you to make the right choice.
4. Consider the Service offered
This is another important aspect of mortgage refinancing companies that you can consider. Does the company answer your questions in time? Did the companies call you to clarify the issues you had? Does the company offer the right technology to make your mortgage refinancing search easy? What about the reviews from people who have had their services previously? These are factors that can help you find a suitable mortgage refinance company.