How To Refinance Mortgage

There are several things you need to know about how to refinance mortgage loans. The three biggest things are who to use, what loan options are available, and the purpose of refinance.

When it comes who to use to help you with the refinance you have quite a few choices. You can use a bank, credit union, mortgage broker or mortgage banker. There are subtle differences between them all which you should be aware of.

Banks and credit unions typically only have their own product lines available. This is especially true with the big banks such as Wells Fargo, Chase, B of A etc. However some smaller banks can broker loans. The major draw back with banks and credit unions is that if the loan does not fit with in their underwriting guidelines you will need to start over somewhere else. The rate from the bank is the rate. They do not have the ability to shop your refinance rate for you.

Brokers and mortgage bankers work with multiple lenders and therefore offer lots of different options. They are not limited to just the products of one bank. The great thing about this is that if the refinance loan does not work with one lender they can flip to a different lender with ease. Brokers and mortgage bankers can shop your loan for you making sure to get you the lowest rates.

The next thing you need to know about how to refinance mortgage loans is the actual loan refinance product options which are fixed rate loans and adjustable rate loans. Within these two options are multiple variations for you to choose from.

If you would like a fixed rate refinance loan term the options you have will be 30 years, 20 years, 15 years and 10 years. The two most popular options are the 30 and 15 years loan.

As far as the adjustable rate refinance terms you have the one month, 2 year, 3 year, 5 year, 7 year and 10 year. These loans with the exception of the one month will have fixed interest rates respective of the term. For example the 2 year loan will have a fixed rate for 2 years. After the 2 years is up it will start adjusting.

As scary as adjustable rate mortgages are they are very well worth considering when refinancing given certain circumstances. For example let’s say you knew you were going to sell your home with in the next 7 years. A 7 year ARM would be a good choice because the interest rate would be significantly lower than a 30 year fixed. And if you know you are going to sell your home you are better of with the monthly savings an ARM offers.

The final thing you need to know on how to refinance mortgage is what your purpose for the refinance is. There are only two purposes. You will either be doing a rate and term refinance, which means you are only refinancing to lower the rate or change the terms of your loan. Or you are will be doing a cash out refinance which means you are either pulling equity out of the home or consolidating debts into the new loan.

It is important to know which of these you will be doing because each one will affect how much you will be able to borrow. If you are doing cash out you will be limited to just 85% of your homes value. If you are doing a rate and term you will be able to go as high as 97% of your homes value.

Those are the most important things you need to know about how to refinance mortgage loan.