Home refinance options explained
A mortgage is a specific type of loan using a home or living quarters as collateral. Mortgages became common among wealthy people in the United States during the early 1900s when a 50% down payment was customary. After the Great Depression, the Federal Housing Administration (FHA) took action to make mortgages widely accessible by insuring mortgage debts. Banks could then lend money to home buyers without the financial risks associated with default.
Mortgage loans are built of many different factors that are customized to your needs. However, your needs as a homeowner today might not be your needs as a homeowner later on in life. Therefore, it’s a good thing we have the ability to refinance our mortgage.
There are numerous variables that you will need to consider when it comes to your plans to refinance a mortgage. From the number of years to the refinance rates, many service providers can make these changes and will support you in this process.
Mortgage loan lenders & markets
What are the different types of mortgages?
A loan to purchase a home, a home equity loan, or a home refinance loan requires different types of mortgages. There are two main types of mortgages currently used to purchase a home: government-insured loans and conventional loans. A government-insured loan provides a safety net for lenders in case of default. A conventional loan doesn’t provide this safety net, so interest rates, down payment requirements, and fees may be higher. Each type will have varying requirements and uses.
Home refinance
Home refinance options allow a borrower to replace their current mortgage with a new one with new terms.
When should you engage in a home refinance?
There are a few ways in which it might make sense for your to refinance your home mortgage. However, there are also a lot of reasons why you should not consider doing so.
People will often engage in a mortgage refinance if they can lower their monthly payments without extending the term length of the loan. This means that the current refinancing rates are lower than the rates you already are locked in. By shopping around, you can find the most current refinancing rates on the market.
Other reasons why people refinance include tapping into the equity of their mortgage or paying off the loan at a faster rate. Some people will be looking to get rid of their FHA mortgage insurance while others will want to changes from an adjustable-rate mortgage to one that has a fixed rate.
How to refinance your mortgage
If you are looking at home refinance options, then you have an abundance of choices. The majority of home mortgage lenders will also offer some sort of refinancing option. Some people like to use more traditional institutions like banks or credit unions to refinance their homes. Others prefer to go down the online route as they often have the most reasonable refinance rates and also tend to be a lot quicker.
If you have made the decision to refinance your mortgage, then you will first need to look at a mortgage refinance calculator. This will give you an idea as to what the refinance rates today might be, as well as what size loan you can expect.
All you need to do is input some core data and you will be able to see what savings you could expect at today’s refinance rates. This will often also showcase the fees associated with refinancing your mortgage. Therefore, you can quickly figure out if refinancing is a good option for you or not.
Shopping around for home refinance rates
Just like with buying anything, you need to ensure you get the soundest price possible for your mortgage refinancing. Comparing the different home refinance rates can be easily done online as the information is usually readily available about the different requirements and benefits of using a particular lender. Even small differences in the refinance rates can add up significantly over time, so it is definitely something that you need to consider.
How to choose an online mortgage lender
When evaluating online mortgage refinance companies, it’s crucial to verify that they service the right types of loans. The mortgage refinance lender walks the borrower through each step of the process, so it’s important to be comfortable with their level of customer service and availability.
Most importantly, do some research. Learn a little bit about types of loans to understand your needs, and be sure to shop around for refinance rates. Be sure to pay attention to any added fees.
Online refinance mortgage lender vs. traditional refinance mortgage lender
Many online mortgage refinance companies allow potential borrowers to submit documentation electronically by enabling the company to access the applicant’s online accounts.
Perhaps you still prefer one-on-one guidance through the process? Many reputable online mortgage providers offer professional loan officers who you can connect with throughout the process.
With a traditional lender, the process could take weeks longer than with an online mortgage refinance lender due to the amount of paperwork involved. While traditional lenders could appeal to borrowers that prefer face-to-face interaction, they may not offer the most suitable mortgage rates in the marketplace.
A traditional lender typically requires several face-to-face meetings to discuss loan requirements, verify paperwork, and evaluate the loan terms. Closing the loan happens in person, as well.
An online mortgage refinance company does everything over the internet, which makes the process shorter for many people. Because of their lower overhead, online lenders may be able to offer lower mortgage refinance rates than traditional local lenders. Be sure to compare multiple offers from mortgage refinance lenders before proceeding.
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