Thinking of refinancing your home loan? Between interest rates, loan terms, and closing costs, you’re probably wondering, “Where do I even begin?” Luckily, asking the right questions can help demystify the process and save you money.
That’s what Penn Street Mortgage is here for. With our team of mortgage brokers, we can help you navigate the home loan process and understand what your options are as it relates to refinancing your existing mortgage.
Here are five questions to ask a lender when refinancing your mortgage:
1. What Types of Refinance Options Do You Offer?
When you refinance your home, you have the opportunity to explore a variety of mortgage loan options, just like when you first bought your home.
Some of the popular refinance loan types include:
- Rate-and-term refinance – As the most popular type of refinancing, this loan type allows you to change your mortgage interest rate and/or the length of your loan without taking out any additional cash from your equity. This could be a good option for you if the current market interest rates are lower than when you originally bought your home.
- Cash-out refinance – With a cash-out refinance, you replace your existing mortgage with a new one and take out the difference in cash. If you have a lot of equity built up, you can use this type of refinancing to pay for larger expenses like home renovations or college tuition.
- Cash-in refinance – A cash-in refinance is when you pay extra money to lower your loan amount. This can help you get a lower interest rate. It’s great if you plan to sell your house soon and want to get the most money when you do.
Our team at Penn Street Mortgage can help you review each of your options, get all your questions answered, and outline which one is best for your specific financial situation. That’s the advantage of working with our team or experts!
2. How Much Equity Do I Need in My Home to Refinance?
When you want to refinance your home, you usually need to have built up some equity in your home before you can qualify. Many lenders will want you to have at least 20% equity, but there are some government programs, like FHA loans, that might let you refinance with less than that. Your mortgage lender will also consider other things like your credit score and how much debt you have compared to your income.
We can help you review your eligibility and make sure you get the best refinancing loan option.
3. How to Choose a Mortgage Lender for Refinancing
Finding the right mortgage lender can make the entire process much more streamlined and straightforward for you. You should compare different lenders from different financial institutions to see what they offer and what their interest rates and fees are. The great thing about working with a local mortgage broker like Penn Stree Mortgage, is we can help you shop around and compare your loan options from several different financial institutions.
We’ll help you find a lender that has great online reviews and a good reputation. Since we have decades of experience helping people refinance their home loans, we can make sure you find a great option with high-quality customer service, good communication and, of course, great rate options.
With multiple loan options to choose from, we’ll outline each of the pros and cons of the mortgage lenders and make sure you don’t leave any additional savings or benefits on the table.
4. How Will Refinancing Affect My Monthly Payment?
A natural question most clients have is, “How will our monthly mortgage payment change after a refinance?”
It’s important to understand each of the different factors that make up your monthly mortgage payment, also know as PITI:
- Principal – The amount of money you borrowed from your lender. Each month, a portion of your payment goes toward paying down the principal balance of your loan.
- Interest – The fee your lender charges for borrowing their money. Your interest rate will depend on different things like your credit score, the type of loan you choose, and overall market conditions.
- Taxes – A lot of lenders include property taxes in your monthly mortgage payment. This money is held in an escrow account and your mortgage company will pay your tax bill on your behalf when it’s due.
- Insurance – If you have homeowners insurance, this cost can be included in your monthly payment as well. Depending on your lender and the type of insurance you have, you may also need to pay for private mortgage insurance (PMI) if your down payment is less than 20%.
So, when you refinance, many of these things may change. That’s why it’s important to review your loan estimate in detail when you get it. It will help you understand your new monthly payment and break down any of the associated costs that come with refinancing.
5. Can I Refinance If I Have an Existing HELOC or Second Mortgage?
If you have a Home Equity Line of Credit or second mortgage, you may still be able to refinance. But keep in mind that your options could be more limited. It can be helpful to pay off the second mortgage before deciding to refinance your existing mortgage.
If you’re thinking of refinancing but have a HELOC on your current mortgage, reach out to us at Penn Street Mortgage. We’ll help you explore your options and outline your best options.
Conclusion
Refinancing your mortgage can be a smart financial move, but it’s important to ask the right questions before making a decision. If you’re thinking of refinancing, contact our team at Penn Street Mortgage today! Our expert team in Chester County can help you understand your options and guide you through the refinancing process.