When it comes to refinancing, it can often be hard to figure out the best place to start.
We will give you everything you need to know about refinancing your current home, so you know what to expect every step of the way.
Pro Tip: A Homeownership Strategy Meeting is completely free through Churchill Mortgage!
Since there is so much to think about when you refinance, it is crucial that the process is as easy as possible without being completely automated and impersonal. We want to help you avoid common refinancing pitfalls that many homeowners experience.
Refinancing is the process of getting a new mortgage so you can lower your interest rate, reduce monthly payments, remove mortgage insurance, or change your loan term or loan type.
The number one reason people refinance is to lock in a lower interest rate. Why? This can potentially save you hundreds to thousands off your total mortgage payment.
You may not realize there are other great reasons to refinance:
If your original down payment was less than 20%, you are probably paying Private Mortgage Insurance. Your home could now have enough equity to refinance and remove it.
You may want to adjust your term (i.e. 30-year to a 15-year loan) to save money on interest and build wealth. This is a great option if you want to own your home free and clear.
If you currently have an FHA loan or an Adjustable Rate Mortgage, it may be worth looking at conventional, fixed-rate mortgage options to help you save money long-term.
A lower monthly payment is typically achieved by refinancing into a lower interest rate or a longer loan term. This can affect the amount of interest you pay, so it’s important to know the total cost of your mortgage when refinancing.learn more
By shortening the term of your loan (and making fewer total payments), you can reduce the overall amount of interest you'll pay over the life of the loan. A lower interest rate can also help lower the amount of total interest paid when refinancing.learn more
It is important to see if you can benefit from any of these refinancing reasons so you can align your mortgage with your financial goals. Contact us if you need help with the next step!
Refinancing can be a vital step in paying off your loan early and becoming debt-free. Whether you’re looking to convert to a fixed-rate mortgage or lower your loan term, we’ll help you find the home loan you need.
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The most important part of understanding the mortgage process is finding a lender who understands you and your home loan goals (like saving time and money). Here is a quick and easy view of the refinancing process:
First, you submit your mortgage application. This lays the groundwork for your Home Loan Specialist to be able to give you accurate interest rate quotes and down payment options.
After your application is completed, you’ll start getting your home inspection and appraisal under wraps. This is when you’ll be asked for any additional documentation to close your loan, if you haven’t already provided it.
Your new home loan will go through underwriting. This just verifies all conditions on your loan are approved and then you will be issued a “clear to close.”
The underwriter will issue your final approval, process your closing paperwork, and schedule your closing date and time. On your official closing day, you will have a lot of documents to sign. Your old loan will be paid off, and your new mortgage will be funded.
When refinancing your current home loan, a 15-year conventional mortgage is a popular option. It’s designed to be paid off over 15 years and will build equity in your home quicker.
You can typically lower your total borrowing cost with lower interest rates and eliminate debt quicker since you’ll spend less in interest over the life of the loan.
Your monthly payments will be higher and oftentimes there is a higher debt-to-income ratio required to qualify.
Many people will refinance into a 30-year mortgage when moving from an adjustable rate mortgage (ARM) or FHA loan.
Your monthly payment will be lower which frees up cash for savings, retirement, and other needs. You are still able to pay extra each month (when possible) to reduce the overall loan term to lower than 30 years.
Your interest rate will typically be higher on a 30-year vs. a 15-year loan, and your loan balance will remain higher for longer. Home equity takes longer to build and you’ll ultimately spend more over the life of your loan.
Because the interest rate on your home loan is directly tied to how much you pay on your overall mortgage, lower rates usually mean lower monthly payments.
Check out this example of monthly payments (principal and interest) on a 15-year fixed-rate loan of $250,000 at 5.5% and 4.0%.
With a 1.5% difference in interest rate, there is a $34,827 difference in interest paid! Imagine what you could do with that in your pocket!
* The scenarios listed above have an APR of 5.5% and 4% respectivly. Additional fees are not included in the examples above.
With so much of your hard-earned money on the line, it’s best to seek advice from a trusted home loan expert and have the confidence that you are in qualified hands.
Looking for answers to your questions about refinancing? We have you covered. Learn more about loan terms, loan applications, documentation needed, and much more.
A: Refinancing is when you pay off an existing home loan and replace it with a new one.
A: Most people refinance their mortgage to save money. That may look different depending on your situation, but most people want to remove Private Mortgage Insurance (PMI), reduce their loan term, or switch their loan type. For more information about the benefits for refinancing, click here.
A: PMI stands for Private Mortgage Insurance. Most lenders require PMI on a Conventional loan when a home buyer makes a down payment of less than 20% of the home’s purchase price. PMI does not safeguard your mortgage payment. If you cannot put 20% down when buying a home, you can still reduce the amount of PMI you pay each month by putting some money down (the more the better in this situation). If you have an FHA loan, you will be required to pay monthly mortgage insurance (MMI) regardless of your down payment amount.
A: It is true that closing costs are a part of refinancing. Closing costs for a refinance usually include but are not limited to credit fees, appraisal fees, any escrow and title fees required, homeowners’ insurance, taxes, and discount points. But do not let that scare you away. You have the option of rolling your closing costs into your loan. This eliminates the need for upfront fees paid on closing day. We can help you decide if this choice makes sense for you and your goals.
A: Documents for your refinance typically include: driver’s license, pay stubs covering the last 30 consecutive days, W-2 forms for the last 2 years, bank statements, recent mortgage statement for your current home loan, homeowner’s insurance information, current title insurance policy, and a copy of your closing disclosures from your current home loan. For a refinancing document checklist, click here.
A: Yes, you can! This is part of our Churchill Checkup. Click here for more information on how to get your free report and schedule a quick call with one of our expert Home Loan Specialists to discuss your refinancing goals.
A: You can download our free Refinancing Starter Kit here. This guide will give you 5 simple steps to refinance your home and paying off your home loan.
A: Interest is the percentage of your loan that is charged for borrowing money. APR (Annual Percentage Rate) is how the interest rate will affect your payments over the course of an entire year and includes any additional fees and potential mortgage insurance associated with the loan. Knowing the APR gives you a straightforward way to compare the cost of one loan to another. This is really the only way you will know the true cost of your loan. For information about how interest rates are calculated, click here.