SAHBA Home Hints
February 8, 2009
Refinancing: Frequently Asked Questions
The process of refinancing can be beneficial to homeowners with unappealing mortgages but it can be a daunting process.
“Homeowners should have a basic understanding of the process before they begin their journey to a new loan in order to ease the stress,” said John Strobeck of Bright Future Business Consultants.
What is a mortgage refinance?
A mortgage refinance is a new loan that pays off and replaces an old mortgage loan. Refinancing a mortgage is the easiest means of restructuring mortgage debt. There are several reasons homeowners choose to do this: lower interest rates or payments, change the length of the loan, or increase or decrease the loan amount.
What is a cash-out refinance?
A cash-out refinance is when homeowners have equity in their home and they refinance for more than what they owe on their old mortgage. The amount leftover after the pay-off is transferred to homeowners.
“While the monthly payments will reflect a higher loan balance, some of the increase could be offset by a lower interest rate or extended maturity date,” said Strobeck, a SAHBA member.
So, how does it work?
The application process for a mortgage refinance is similar to purchasing a home the first time. Homeowners will consult with a lender, have the home appraised, fill out a loan application, and provide the necessary documents verifying income and assets.
Homeowners also will have to pay closing costs again, but they will be lower than the first time.
Once the new loan has gone through, the new lender pays off the old lender, and the new lender files a claim on the home.
Can homeowners reduce their mortgage by refinancing?
Yes, the homeowner's payments can be reduced by lowering the interest rate or by extending the length of the loan.
How can homeowners determine if refinancing is right for them?
Homeowners can use a refinance calculator to determine if refinancing would help them reach the financial goals they are working towards. Visit www.calculators4mortgages.com for a free refinance calculator.
“If the homeowner is able to find a better deal through refinancing that will help them save money, then the time is right to refinance,” Strobeck said.
Check next week's Home Hint for Strobeck's refinancing “how to” tips.
Details: Strobeck at 751-0676.
SAHBA represents about 720 member businesses serving the residential construction industry in Pima and Cochise counties.
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