Mortgage Refinancing to Ward off Foreclosure: The Steps Involved
Refinancing is a term used for discharging an old debt with the help of a new mortgage obtained at a lower interest rate. The reasons may be improvement in credit, growth of equity or simply to avoid a foreclosure. However, refinancing has its own risks and caution is advised while obtaining a refinance. It is strongly recommended to be informed about mortgage refinance while availing any. Here are a few things you should know before obtaining refinance.
Availability of lower interest rates
An existing loan may have higher interest rates. Refinance allows you to obtain a loan at lower interest rates that in turn allows you to lower your monthly repayments. This facility makes refinancing an attractive option. The market changes frequently and so do the interest rates. So, refinance at a time when interest is lower not only helps you waive your previous loan but also to settle for lower monthly payments.
Credit score and its relation to refinance
Companies generally tend to accept or decline your refinance loan application on the basis of your credit score. So make sure your credit score remains high before obtaining refinance. If you have a bad credit score, you can still obtain refinance but on a higher interest rate. An improved credit score on the other hand, allows you to obtain a variety of loans along with lower interest rates.
Home equity and its role in refinance
Building your home equity will take a short time if you opt for mortgage refinancing. If your existing loan period is 30 years you can opt for refinancing to lower the loan period to a shorter duration. Lower the duration of your loan, less will be the time taken to build up your home equity. Though short term loans require high monthly payments, yet most of the money applies to the principal rather than the interest.
Eligibility for mortgage refinance
In you intend to stay at hour home for a long time, than refinance can be the most viable option. A comparison between estimated savings to the total refinancing fees should be studied to get a clear idea if refinancing is the most suitable option. Most companies determine the eligibility of a refinance on the basis of income, status of your existing loan, credit score and other related information.
Requirements for mortgage refinance
Requirements to obtain a refinance are almost the same as that of your existing loan. You need to fill out the loan application form, provide your credit report and the estimated value of your property. A lender can accept or decline your loan application on the basis of your credit score. Your home equity is also an essential part of the requirements. These are the primary requirements. Secondary requirements include income proof, financial statements, appraisal report, title to your property and property survey. Other relevant information such as monthly payment of your existing loan, taxes, insurance etc. may also be required.
Cost of refinancing
Refinancing requires basic fees such as appraisal cost, legal fees, application fee, insurance fees and appraisal costs. So whether your reason is growth in equity, improvement in credit or to avoid a foreclosure, you must choose your refinance deals with care.
Availability of lower interest rates
An existing loan may have higher interest rates. Refinance allows you to obtain a loan at lower interest rates that in turn allows you to lower your monthly repayments. This facility makes refinancing an attractive option. The market changes frequently and so do the interest rates. So, refinance at a time when interest is lower not only helps you waive your previous loan but also to settle for lower monthly payments.
Credit score and its relation to refinance
Companies generally tend to accept or decline your refinance loan application on the basis of your credit score. So make sure your credit score remains high before obtaining refinance. If you have a bad credit score, you can still obtain refinance but on a higher interest rate. An improved credit score on the other hand, allows you to obtain a variety of loans along with lower interest rates.
Home equity and its role in refinance
Building your home equity will take a short time if you opt for mortgage refinancing. If your existing loan period is 30 years you can opt for refinancing to lower the loan period to a shorter duration. Lower the duration of your loan, less will be the time taken to build up your home equity. Though short term loans require high monthly payments, yet most of the money applies to the principal rather than the interest.
Eligibility for mortgage refinance
In you intend to stay at hour home for a long time, than refinance can be the most viable option. A comparison between estimated savings to the total refinancing fees should be studied to get a clear idea if refinancing is the most suitable option. Most companies determine the eligibility of a refinance on the basis of income, status of your existing loan, credit score and other related information.
Requirements for mortgage refinance
Requirements to obtain a refinance are almost the same as that of your existing loan. You need to fill out the loan application form, provide your credit report and the estimated value of your property. A lender can accept or decline your loan application on the basis of your credit score. Your home equity is also an essential part of the requirements. These are the primary requirements. Secondary requirements include income proof, financial statements, appraisal report, title to your property and property survey. Other relevant information such as monthly payment of your existing loan, taxes, insurance etc. may also be required.
Cost of refinancing
Refinancing requires basic fees such as appraisal cost, legal fees, application fee, insurance fees and appraisal costs. So whether your reason is growth in equity, improvement in credit or to avoid a foreclosure, you must choose your refinance deals with care.
