What Is The Process Of Refinancing A Home Loan?

What is the process of refinancing a home loan? Refinancing a home loan can be done if a borrower wants to simply save some money on a monthly basis. "Refinances could be as simple as a borrower just wanting...

"Refinances could be as simple as a borrower just wanting to save money on a monthly basis, which could correlate to perhaps a long-term (20, 25, and 30 year) fixed loan. It could be an adjustable rate loan, a loan that could have a very low monthly payment, or could be a combination of those," explains Doug Perry, who has worked in the Consumer Markets Division for Countrywide Home Loans for 16 years. "A loan called a hybrid or a period ARM combines the best attributes of a fixed rate loan and an adjustable rate loan.

"Refinances also could pertain to a thing such as consolidating other debts you have," continues Perry. "This allows the borrower to utilize some of the equity that has been built up. Right now, the United States is in a period of almost unprecedented equity growth, as home values continue to grow at a record pace."

"Consumers are using that equity in a manner that is financially sound, allowing them to make good long term decisions," Perry adds. "It is a great tool and opportunity for home owners. One of the privileges of being a homeowner is the availability to use your equity, so we are getting a lot of requests for that on refinances. Also, we are getting requests for using home equity lines for credit on a second mortgage, which provide very flexible terms, and are great financial tools."

There are actually a lot of reasons that you might refinance your home. Most states will allow you to deduct 100% of your interest on a refinanced mortgage or home equity line of credit, if the money is being used for home improvements, to eliminate debt, for education or other expenses.

Many people financed their home at a higher rate than is currently offered. If they refinance, they could save on monthly payments and have a lower rate than on credit. cards. You could save thousands of dollars. If you have too many bills or owe too much on credit cards, refinancing a mortgage could be very beneficial to you,as long as you don't again max out your cards when they are paid off, if you use the money from a refinance to pay them off.

If you took out a loan that was fixed for three, five, or seven years, followed by an adjustable rate, you could refinance and get a fixed rate for 20, 25, or 30 years. You could have more peace of mind.

"The steps to refinancing a mortgage are relatively simple," explains Perry. "It is a little bit less hectic than a purchase transaction. On purchase transactions there are agreed upon deadlines and dates; the borrower is generally moving out of one residence into another, so there are a lot of outside activities going on. Refinancing is a little bit less hectic, because nobody is moving. It is the same house; a borrower applies with a lender."

"Depending upon the transactional lenders verifying key data, they may appraise the house; they may verify the borrower's key qualifications, income, assets, and credit report," Perry adds. "They might also run a title search, which determines if there are any other liens on the property that might need to be resolved prior to refinancing."

"From there a loan closing is set up, where a borrower signs the loan documents," according to Perry. "Depending on the loan, there might be a three day right of rescission, depending again upon the type of transaction. From there, the loan funds, and if the borrower's old loan is paid off the new loan takes place."

Refinancing a home loan might be a valuable tool for you. To decide whether it would be appropriate, talk with a financial expert, like the experts at Countrywide Home Loans.

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