Refinancing Rundown – Part 1
What does it mean to refinance a mortgage loan?
Refinancing is when you get a brand-new loan to pay off and replace your existing loan. This means the terms of the old loan are replaced by the new agreement.
Why refinance an existing loan?
There are various reasons, depending on your circumstances. Some reasons to refinance may include whether you (the borrower) need to:
- Adjust certain terms of your loan
- Get a different term length
- Refinance out of an FHA loan
- Consolidate debt
- Change to a more convenient payment structure
- Finance renovation projects and/or home upgrades
- Lock into a lower interest rate to possibly reduce mortgage payments
- Remove private mortgage insurance (PMI) or mortgage insurance premiums (MIP).
Is a new application required to start the refinance process?
You’re applying for a new home loan with new terms, so you’ll probably need to go through the mortgage application and approval process.
Can a lender deny my refinance application?
Your application can be rejected for reasons that will be explained by the lender.
Are there closing costs associated with refinancing?
Yes, you’ll typically pay closing costs. However, some programs will allow you to finance the closing costs.
Is an appraisal required to refinance?
Whether an appraisal is required depends on the lender and the type of loan.
Does refinancing change my loan balance?
A refinance loan may have a higher loan balance than your original loan. This could happen if you finance the closing costs or tap into the home’s equity and take cash out. However, the loan balance could be lower if you bring cash to the closing.
After purchase, is a waiting period required before a home loan can be refinanced?
It depends on the refinance program you’re looking for and the loan type.
Is there a restriction on the number of times a home mortgage can be refinanced?
Technically, there’s no limit on how often you can refinance your home loan.
Be sure to check back for Mortgage Loan Refinancing: FAQs Part 2. We will highlight some pros and cons of refinancing.