Tips To Help Your Home Mortgage Refinance Process

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Your home is a great asset that can increase in value over time, providing you equity that you can borrow against. When you are ready to refinance your home's mortgage and benefit from its equity, make sure you understand the process so you can get the most out of the experience. Here are some recommendations that you can use to help you out when you are looking to refinance your home mortgage.

Understand Your Situation

A refinance for your mortgage allows you to borrow against the equity that you already have in your home, which you can use to make home improvements, pay off unsecured debt, combine multiple mortgages, or reduce your mortgage payment costs. With all of these options available for a refinance, you need to first know what amount of equity you currently have in your home. The difference in your existing mortgage loan balance and the value of your home will provide you with this amount, which you can complete with a quick calculation. 

Consult with a real estate professional in your area to get an accurate home valuation for your property, then subtract from it how much you still owe on any mortgage. If you have more than one mortgage, such as a second mortgage or HELOC (home equity line of credit), make sure you combine both balances together because they will both need to be paid off during your refinance. 

You will also want to consult with your refinance mortgage lender about the new loan's requirements regarding your home's equity. Many lenders may not be willing to let you borrow all of your home's equity, so they are going to allow you to only borrow a certain percentage of the value. Ask your lender to find out the regulations for this requirement. 

Calculate Loan Costs

Another important consideration to remember in approaching a loan refinance is the upfront costs of the refinance and what it means for your mortgage's monthly costs. Your refinance mortgage lender can provide you with an estimate of your mortgage costs that will include the amount of closing costs and any points to reduce your interest rate. Look at other fees, such as a loan origination fee and how much the home appraisal will be, as examples. 

Find out the type of loans that are available with a fixed or adjustable rate. The interest rate will be a part of determining how much your payment will be each month and if it will change over time. For example, as fixed mortgage interest rates have been increasing, you can look into an adjustable-rate mortgage that has a lower initial rate to keep your mortgage payment lower. Or lock into a fixed rate now and benefit from interest costs remaining the same through the life of your refinanced mortgage.

Reach out to a mortgage provider to learn more about refinances.