Your home is a sacred space where you live, work, and create special memories. Not only does your home hold emotional value, but it's also one of the most important investments you will make throughout your lifetime. Did you know it can also help you reach your future financial goals? By refinancing your mortgage, you can shorten the length of your loan, lower your monthly payment, consolidate debt, or even take some cash from your home’s equity to use for home renovations or other expenses. Let’s examine how refinancing a mortgage works, how much it costs, and its many benefits for homeowners.
What is mortgage refinancing?
Refinancing your mortgage means trading your current mortgage for a newer one – often with a new principal balance and interest rate. Your lender will use the new mortgage to pay off the old one, leaving you with just one loan and one monthly payment. Check our refinance application checklist to see what you need before applying.
What are the benefits of refinancing your home?
How do you know if refinancing your home is a good option?
- Access cash: If you have built up equity in your home, you can turn that equity into cash. Use it for home repairs, medical fees, or debt consolidation.
- Pay off your mortgage sooner: Refinancing your mortgage to a shorter term will allow you to apply more of your income toward your loan principal each month and pay off your mortgage sooner.
- Lower your monthly payments: Your income has decreased, or you want to increase your savings for college or retirement. Extending your loan term could lower your monthly payment.
- Pay less overall for your mortgage. By refinancing to a shorter term and/or reducing your mortgage interest rate, you could pay less interest over the duration of your loan.
How Does Refinancing A Home Work?
The refinancing process is less complicated than home-buying. First, explore your options, and fill out an application with a mortgage lender or financial institution. The lender will look at your income, assets, debt, and credit score to determine whether you meet the mortgage requirements and can repay the loan based on the lender's guidelines.
How Much Does It Cost To Refinance Your Mortgage?
Refinancing your mortgage may give you breathing room in your budget, saving you money over time. However, the process may be more challenging for borrowers with lower credit scores or other complicating factors. You can use our mortgage refinancing calculator or our refinance saving calculator to learn more about the costs and benefits. Your Closing Disclosure tells you what you need to pay at closing. Here are a few of the refinancing closing costs:
- Application fee: Some lenders charge an application fee due when you apply for your refinance.
- Appraisal fee: Most lenders require appraisals to determine the value of your home before refinancing.
- Attorney fees: In some states, an attorney must review and file paperwork for your loan. Attorney fees can vary widely by state.
- Title search and insurance: Your lender may require another title search when refinancing your loan.
- Expect to pay around 2% – 6% of your loan balance in closing costs. Depending on your lender's requirements, you can roll your closing costs into your loan balance.
Refinancing your mortgage may be an excellent option if you are a homeowner looking to meet some of your financial goals. If you have questions about the refinancing process, our knowledgeable mortgage professionals are here to help you determine the best options for your situation. To learn more, contact KFS Mortgage Company today.
KFS Mortgage Company, Experience, Trust, Peace of Mind.
KFS Mortgage Company, 207-873-5153, www.kfshomeloan.com
NMLS #2097505, Maine NLC2312503, Equal Housing Lender