Definition: To swap out your old loan with a more favorable loan. The new loan pays off the old loan, so you just make payments on the newer (presumably better) loan. Sometimes a borrower will borrow a little extra during refinancing to take some equity out of an asset (known as "cash out" refinancing).
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Common questions about refinancing:
How do I know if refinancing is right for me? This all depends on why you are considering a refinance.
For a Rate/Term Refinance the first thing we do is gather all of your current loan information so we can calculate how much interest and time is left on your current mortgage. We then compare it to what is available and if you are able to decrease the amount of interest you will pay over the remaining time you plan on owning the property we will encourage you to refinance. If it is not in your best interest we will explain to you why your current loan is preferable.
For someone looking to Cash Out Equity we will look at the value of your property versus what you are looking to borrow. There are restrictions to how much you can finance for a Cash Out Refinance and we will make sure you're getting the best terms available.
What loan program will my new loan be through? This depends on many factors, such as your current loan, your credit score, how much equity you have in the property, your income levels, what your ultimate goal is with the refinance, the term you would like on the new loan, your ability to qualify for different mortgage types, etc. This is why it is so important to work with a trusted mortgage professional who will consider all loan types for your new loan and will present the information to you in a concise and easy to understand manner. We at LA Lending will show you through a virtual presentation your current mortgage as compared to a new mortgage to make sure we're steering you in the right direction.
Will I loose all of my equity if I refinance? The amount of equity you have is based on your appraised value versus your new loan amount. We are not trying to take away your equity by refinancing. We want to make sure you accomplish your goals with the refinance, whether it is eliminating years on your mortgage, paying less interest over time OR providing you with cash from the closing.
Is refinancing difficult? At LA Lending we try and make the loan process as pain free as possible. Depending on your loan we may ask for financials, an appraisal may be required and you will have to attend a closing to sign new loan documentation but ultimately it's all worth it!
What if I'm upside down on my mortgage? Have you heard of the terms HARP or DU REFI PLUS. These are loan programs designed to help certain borrowers who don't have equity in their current property. We're just now coming out of a housing bubble and many borrowers purchased their properties at inflated values OR have been subject to steep property value declines. You should definitely call and see if you are eligible to refinance if it will save you money over the period of time you own the home!
**Specifics listed here are just for informational purposes and are not to be used to replace a consultation with a licensed mortgage professional.
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