Modus Mortgage

Refinance Your Home Loan

Refinance Your Home Loan

What It Means To Refinance

What It Means To Refinance

Refinancing allows you to lower your payment, change your term or take out cash. If you’re looking to free up capital as a homeowner, it’s important to understand the mechanics of home refinancing. Broadly speaking, a home refinance enables you to pay off your existing mortgage and replace it with a new one. While the concept may be hard to understand at first, a detailed examination shows many potential benefits. It’s important to learn about refinancing and speak with a Loan Officer to make an informed decision.

Quick Plan

Understand what type of refinance you want

There are different kinds of refinancing, so learn the differences and which might be right for you.

Time your refinance right

You’ll want to make sure you refinance at a time where you can significantly reduce your interest rate.

Refinance for the right reasons

There are good and bad reasons to refinance. Make sure to treat any cash you receive as an investment, not a gift.

Refinancing Defined

Home refinances come in two main varieties: Rate-and-term and Cash-out. Knowing the difference will allow you to better select the type that’s right for your circumstances.

Refinancing Defined

Home refinances come in two main varieties: Rate-and-term and Cash-out. Knowing the difference will allow you to better select the type that’s right for your circumstances.

A rate-and-term refinance is used to change the term, rate, or both, of an existing mortgage. By changing the rate and/or term, monthly payments have the potential to significantly decrease. This type of refinancing would be best to utilize if interest rates are decreasing or if you have improved your credit score.

A cash-out refinance is when an existing mortgage is replaced with a new one of a larger amount. The difference in the loan amounts is used as the “cash out” the borrowers receive. This option is often used to convert home equity.

The Benefits Of Refinancing

The Benefits Of Refinancing

A better mortgage rate

If mortgage rates have fallen since you took out the loan, you can often save money by refinancing you mortgage into a new home loan at current rates.

Lower monthly payment

With a lower interest rate, you can get lower monthly payments as well, particularly if your refinanced mortgage has the same payoff date as your old home loan.

More predictable costs

If you currently have an ARM (adjustable-rate mortgage), you may choose to refinance to a fixed-rate loan to lock in your rate for the remainder of your mortgage.

Shorten your term

This allows them to pay the mortgage off faster and save a lot of money in interest over the life of the loan.

Borrow money

With a cash-out refinance, you can borrow against your home equity to obtain funds for any purpose.

Refinance Process

Refinance Process

Step 1: Application

You will begin the refinance process by filling out a loan application with your basic personal and financial information.

Step 2: Connect with a Loan Officer

A Loan Officer will review your application and contact you to go over your options. Here you will let them know your goals, may that be a kitchen renovation or consolidating debt. They will go over the costs regarding your refinance and the current interest rates.

Step 3: Underwriting

After you have decided the option you want and lock your interest rate with the Loan Officer, your loan will be sent to processing. In processing, it will be submitted to an Underwriter to verify your information, ask for additional documents and order an appraisal, if needed. A Loan Processor will be contacting you to collect various documents and let you know the stages of your loan.

Step 4: Close

Once the Underwriter is satisfied with the information provided, the loan will be Clear-to-Close. During this time, the Loan Processor will work with your chosen Closing Agent to prepare your final closing package. Your Closing Agent will contact you and set up a date and time for you to sign your closing package and wire your payoffs.

When Is The Right Time To Refinance?

When Is The Right Time To Refinance?

Generally speaking, you’ll only want to take a stab at refinancing if you can reduce your rate by at least 1 percent.

The interest rates aren’t the only thing you’ll need to keep in mind, though. You’ll also want to take the closing costs (and whether you can handle them) into consideration. Remember that those fees are often 3 to 6 percent of your principal, which often equates to thousands of dollars. If your accounts aren’t ready for the hit, refinancing might not be the right decision.

Lastly, you’ll want to think about how long you plan on staying in your home while you’re juggling whether or not to refinance. If the savings are substantial and you’ll be in your home long enough to recoup those fees, then refinancing might be the right choice.

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