Refinancing your home is simply exchanging your existing mortgage (the conditions and obligations for the repayment of your home loan) with a new mortgage under different terms. It is usually done to reduce or stabilize monthly payment obligations. For example:
- When a better interest rate is available you may be able to lower your monthly payments or shorten the term of your loan
- When you wish to consolidate other debts into a single loan to better manage a budget
- When you wish to switch from a variable-rate to a fixed-rate to minimize your long-term monthly payment risk.
In order to help you understand refinance loans a little better, here are a few definitions of frequently used terms.
- Borrower - The person borrowing the money to purchase or refinance a home
- Closing Costs - are the costs involved in creating your new loan. These costs may range from minimal to substantial so you should ask your lender for a breakdown of these costs before choosing your lender or your loan.
- Interest - The finance charge the borrower pays to use the Lender's money to purchase the Property
- Lender - Usually a bank or financial institution who offers the mortgage to the borrower
- Mortgage - An agreement where a homeowner pledges an interest in their property as collateral for a loan on that same property
- Point - A point is 1% of the loan amount. Sometimes a borrower will pay a point (or more) to receive their loan
- Principal - the loan amount
- Property - The home or piece of real estate being financed
- Term - the length of time scheduled to repay the loan (usually 15 or 30 years)
Because there are many different reasons for refinancing, as well as many different kinds of loans available, it's important to work with a LendRIGHT Lender who can help you evaluate if refinancing is right for you.
They will conduct a complimentary assessment of your current mortgage and advise you of the opportunities and challenges (if any) associated with refinancing your loan.
A LendRIGHT Lender will make sure that you understand all of the options available to you so you can make good choices.