Throughout the course of homeownership, one of the toughest struggles that anyone must face is coping with the demands of monthly mortgage payments.
Regardless of whether you’ve taken out a loan for a quaint little apartment or a gargantuan mansion, the struggle of paying a mortgage off will always be the same. Although the monthly charges may vary, it can still be quite difficult to cope with keeping up to payments that can essentially take out a chunk of your salary.
As difficult as it may be to put up with the hurdles of owning a dream home and paying off a mortgage every month, there’s one solution that can lighten your load: mortgage refinance.
Mortgage refinance explained
Mortgage refinance, to put simply, is a financial solution that allows homeowners to “reboot” their current home loan by replacing it with a new one. Refinancing presents itself as a viable option a few years into the loan when homeowners either experience a gain or loss in monthly income as it allows them:
- To reduce their interest rates
- To negotiate for lower monthly payments with another down payment
- To support payments by tapping into their own home’s equity (which also helps with cutting down monthly payments)
- To have faster repayment periods
- To cut out the need for costly FHA mortgage insurance
- To change their loan types
Common refinancing FAQs answered
Understandably, the concept of refinancing can bring up many questions for anyone who is considering it for the first time or simply hasn’t gone through the whole process yet. To get a better grasp of the entire concept of mortgage refinancing and understand the process of applying for one in greater detail, let’s go over a few common FAQs:
“What happens when I refinance a mortgage for my current home loan?”
Through refinancing, you’ll essentially redirect your payments to another source that will handle the old mortgage. Instead of paying off the original mortgage that was intended to pay the seller whose home you bought, a refinanced mortgage transfers your payment over to a new channel that essentially pays off the balance of your old home loan.
To put it simply, getting a mortgage refinancing will allow you to restart your current payment scheme by making the remaining balance of your old home loan the subject of payment. This essentially leads to a lower monthly payment.
“Why should I refinance and when should I do so?”
Before you head to your local loan provider and request for a refinance, it is important to understand that there are a few situations where it would be most appropriate to do so, namely:
1. If you’re looking to reduce your monthly payment
Mortgage refinances are the most appropriate option for anyone who is looking to ease up their monthly payments because it becomes easier to lower the interest rate per month. Aside from interest rates, however, you can also extend your loan term with the help of a mortgage refinance to reduce the total monthly payment figure.
2. If you’re looking to pay off your loan much faster
Should you find yourself in a much more desirable financial situation, then refinancing your mortgage will be highly recommended. This is so that you can reduce your loan term by 25 to 50 percent at the small expense of an increase in your monthly dues.
3. If you need to change your loan type or policy
Over time, you may notice that an adjustable-rate mortgage won’t be as wallet-friendly as you first expected it to be once it increases. This means that a mortgage refinance helps to facilitate the switch to a fixed-rate loan.
Mortgage refinancing provides a short and long-term solution for any homeowner who continues to struggle with their monthly home loan payments by allowing a loanee to weight out their options and make a few tweaks. If you’re in the Los Angeles area and need a mortgage broker who can help with your refinancing needs, get in touch with us today by calling 818-601-2231. We’re happy to help!