How To Refinance Your Home

Here is everything you need to know on how to refinance your home. This article will cover your options and the things to think about. After reading this you will be more than prepared to move forward with the refinancing of your home.

The first thing to consider in your quest is who to choose to help you with refinance as you have several options. You can work with a mortgage broker, mortgage banker, bank, credit union or your current lender.

There are definitely pros and cons with each option. But over all I would highly recommend that you work with a mortgage broker. Here’s why I would recommend this. First brokers work with all kinds of different lenders. In fact they can send your loan to the big banks such as Wells Fargo, Chase, and Bank Of America.

Mortgage brokers have a vested interest in getting the refinance of your home approved and funded as they are only paid on a commission. And since they are commission based they want to make sure that they provide you with excellent advice, service and the best loan they can get you.

Although brokers will typically get you the best refinance out there, it is not always the case. I would highly recommend that you shop around to make sure you are getting the best loan and the best advice.

The other thing you need to know on how to refinance your home is that you will typically have several loan options to choose from. Although there are multiple options it really comes down to two choices. These choices are an adjustable rate mortgage or a fixed rate mortgage.

As bad a rap as adjustable rate mortgages have received lately it still may be worth your consideration. ARM’s have variety of options, 1 year ARM, 3 year ARM, 5 year ARM, 7 year ARM and a 10 year ARM. All of these will have fixed interest rates for the set amount of years, after that they will start to adjust.

Here is a great example of why you may want to choose a 5 year ARM for your home refinance. If you know you will be selling your home within the next 5 years it would be a wise decision to go with this loan as the interest rate can be as much as a full 1% lower than a 30 year fixed. Depending on the loan size this could save you $100 a month or more over the next 5 years.

The other big thing you need to know about how to refinance your home is the purpose of the refinance. There are only two reasons to refinance. The first is rate and term and the second is cash out. Rate and term is for the sole purpose of lowering the interest rate or changing the term of your loan. Cash out is to get cash or consolidate debts.

The reason why this is so important is that the amount you can borrow is severely affected by the reason of your refi. If you are doing a rate and term you can refinance up to 97% of your homes value. If you are getting cash out you will be limited to 85% of your homes value.

Hopefully this article has answered your question of how to refinance your home.