When it comes to mortgages, there can be some things that are particularly confusing, especially for first-time homeowners. This includes the very basics when it comes to the process of refinancing as well as what the average timeline may actually be. In this way, a more informed decision can be made.
What’s Refinancing to Begin With?
Before anything else, it’s worth repeating exactly what a refinance situation is. When a mortgage is refinanced, that means replacing the existing loan with a new one. The terms of the loan that’s replacing the current one may or may not vary. Things that can shift during refinancing include:
- Interest rate
- Monthly payment
- Term length
Upon closing, the funds from the refinancing will pay off the original mortgage. Succeeding payments are then made on the new loan instead.
Why Bother Refinancing at All?
People look into refinancing for a number of reasons, such as:
1. Cash out. – The term ‘equity’ refers to the percentage already owned in a home by the person buying it/making the payments. Equity in a property gets built with every monthly payment towards the balance of the loan. A cash-out refinance means a higher loan principal and getting the rest taken in cash. This money can then go towards whatever needs you have at the time, such as paying off major debts or even home repairs.
2. Change of either interest rate or loan terms. – If present-day rates are lower than the existing interest rate of a mortgage or there are issues meeting the monthly payments, then a rate and term refinance are likely in order. This involves no change to the principal balance but to the monthly interest rate instead. A loan can then be refinanced into a longer term so that payments can lower or, for those wanting to pay off their loan quicker, the term can be shortened accordingly as well.
It should be noted that refinancing could affect a person’s credit score; the window before a hard inquiry comes in is anywhere from two weeks to 45 days. The variable is dependent on the credit bureau, but a good rule of thumb is to apply within a 30-day window prior to the closing date.
So, How Long Does a Refinance Actually Take?
The standard time for a refinance is anywhere from 30 days to 45 days. That said, an exact timeline cannot be determined from person to person. The process can be prolonged by third parties, appraisals, and inspections. Refinance duration will also depend on the applicant’s finances as well as the overall property size.
Refinancing is the process of replacing a present loan with a newer one, due to either change of interest or switching the loan terms. Cash-out is another reason why people tend to refinance. The standard time of refinancing takes around 30 days to 45 days. Now that you know the duration of refinancing, it’s time to work with specialists that can help you make this process easier on your end.
Trying to find reputable, trustworthy mortgage lenders in Los Angeles, CA? My name is Shannon Christenot, and I am a licensed mortgage broker that can’t wait to help you. Get in touch with me at (818) 601-2231 to get started!