There are situations when, for various reasons, you can no longer pay your monthly installments for your mortgage. Sometimes it is because of the high interest rate, other times unforeseen situations arise, such as the loss of the job. Regardless the reason, the monthly rates can become a real burden. If you find yourself in such a situation, a refinancing could help you.
What does a Denver home refinance entail? Read on and find out the answer.
What is refinancing
Refinancing a loan involves taking out a new loan to replace the old one, that is, you will repay in advance a loan because the conditions are no longer advantageous for you. Basically, you take a new loan to pay the current one, thus accessing a better loan offer, with conditions that are more suitable for your financial situation.
By refinancing a loan, it is allowed to renegotiate the terms and dates due, with the possibility of obtaining additional funds for the same rate that you are currently paying. A refinancing loan can bring you the following benefits:
- Reducing the monthly installment by extending the repayment term
- Getting an extra amount of money
- The possibility of granting a grace period in which to pay only the commissions and the interest
Conditions for refinancing a mortgage
The conditions you must meet in order to receive a refinancing loan are similar to those for obtaining a regular loan. Depending on the banking institution you have chosen, it may have specific conditions that the applicant must meet. These may include:
- Being a US resident
- Having a social security number
- Having an established credit score
- Being employed
Some banks may have stricter conditions, which is why you need to check different offers. You should keep in mind that, in the case of refinancing your mortgage loan, the bank can reassess your income to see if you fit into the conditions that you just negotiated.
As this is a new loan, you should know that you will have to bear the costs of granting it. These costs may include: the granting commission, insurances, notary fees etc. However, some banks, as part of their offer, could eliminate some of these fees.
Why is refinancing a good idea?
Lower interest rate
This is one of the major reasons why homeowners choose to refinance their mortgage. When you notice a drop in interest, it is an opportunity to grab. Experts say you should try to reduce your interest rate by at least 2%, but actually, even 1% would represent a pretty good saving for you, so you should definitely take it into consideration.
The interest rate reduction also helps you to increase the speed with which you build equity in your home.
Fixed interest assessment
Unlike adjustable-rate mortgages, where the interest rate can go up at any time, especially a few years after you have cashed out the mortgage, when you refinance your mortgage, you can now choose to apply a fixed interest rate that will never change until you pay off the loan.