Updated: Oct 13, 2021
Refinance is paying off an existing mortgage and replacing it with a new mortgage.
There are a few reasons people want to refinance:
1. To lower interest rate. If you have a mortgage with an interest rate of 4% and now the interest rate is 3%, you should refinance to get a lower interest rate.
2. To get rid of MI (mortgage interest). People pay mortgage insurance because when they applied for a mortgage, their loan to value (LTV) is over 80%. When house value increase, even though the equity is still less than 20%, the LTV decreases and probably decreases to less than 80%, then you can get rid of MI by refinancing.
3. To convert from adjusted interest rate (ARM) to fixed interest rate.
4. To change mortgage term. For example, change from 30 years to 15 years mortgage.
5. Cash-out refinance. To take equity out to pay for another debt.
What is the process of refinancing?
Similar to the first time when you got your mortgage. But this time remember to shop for interest rates and closing costs. Interest rate, the closing cost can be very different from lender to lender.
Our website mratequote.com helps you to get interest rate quotes from different loan officers so you can compare interest rates. It will easily save you thousands of money.
There are quite a few things you need to consider before refinancing. We will talk more in the next blogs.