Every day our living conditions change, you could suffer an accident or your properties can suffer attacks, or natural disasters can happen. On the other hand, favorable conditions may also arise from unforeseen, promotion or improvement of sales, to put a case and this is a good moment to get the best personal loan rates.
When these micro-economic scenarios are altered surely your current mortgage loans also need adjustments.
In these situations, the normal thing is to go to your credit card, instant credits or guarantee loans. But interest rates can be high and the return period very short if you choose wrong.
However, before applying for personal loans, can a mortgage loan be refinanced? First, it is necessary to understand what a refinancing implies.
What Is a Refinance?
In a strict sense, refinancing means “re-financing”. It is applied when the payment conditions of a loan that has already been granted are altered. It is the best option as long as you are aware of the conditions of the old and new financing and they turn out to be convenient for you to avoid poor credit loans.
Adequate Conditions to Request a Refinance of a Mortgage
Sometimes a restructuring will be enough for the income to exceed the expenses. If that is not the case and a mortgage loan is being paid, it is convenient to study a refinancing of the mortgage.
Normally, the new financing will be an option if:
- Financing fees account for 40% of monthly income
- You want to move from a variable interest rate to a fixed interest rate
- It takes a large sum of money to start a business
- Cancel or unify other debts
- Improvement of the credit reputation
- The first years of mortgage credit are in progress
It is important to have a good amount of money saved, the mortgage refinance involves some standard expenses. Determine if your economic condition really merits this procedure, if not necessary, investing time and effort in this procedure can be detrimental rather than beneficial.
When Mortgage Refinancing Is Not a Good Idea
Regardless of getting refinanced through loan companies online, banks, mortgage companies or loan brokers; It is inconvenient to request the new financing if the payment period of the installments is already being completed, for example, if the installments are paid in 15 years, requesting a refinancing after 8 or 9 years will result in loss of the capital of the property.
This is because all loans, regardless of whether they are online loans, from banks or real estate institutions, have a higher percentage corresponding to interest at the beginning of the period, which decreases as it progresses and which, toward the end, installments correspond almost entirely to the value of the property.
It is also not a good idea to ask for a refinancing if the credit rating of the borrower deteriorated, if the credit cards owe more than 50% of their capacity, the bank balance sheets reflect a largely empty account, among other things and the conditions of the new credit could be worse than those of the first.
A Good Tip… you can request an increase in the limit of the credit card without using it, your only goal is to improve the qualification as a borrower
How a Refinance Works
It is not simply a matter of filling out a form, like financing, it involves covering certain expenses, which as a general rule represent between 3 and 6% of the new loan requested. Some of those expenses are:
- Charges for a loan application cost between 75 and 300$ But can be free for online sites
- Charges for loan preparation, involve 0 to 1.5% of the loan capital
- Points, equivalent to each 1% of the value of the loan, paying it will reduce the interest, normally they are paid up to 3 points
- The charge of appraisal, costs from 300 to 700 $ and is the fixation of the current value of the property
- The inspection fee is the evaluation of the current condition of the house and can cost from 175 to 350 $
- The closing charges the payment made to the lawyer who legalizes the loan and is paid between 500 and 1000 $
- Insurance, you must check that the property is insured against damages, the requirement for a first mortgage loan
- You may be required to pay between 0.5 and 2% of the value of the credit if the amount exceeds the value of the property by 80%
- Title search consists of locating the legal documents of the property in force, the cost ranges between 700 and 900 $
- Expertise charge, the credit company ensures that the home is where it was declared, this can cost between 150 and 400 $
- Fine of advance payment, arises from the cancellation of the previous credit and may amount to the interest of the installments between 1 and 6 months
In general, the best loan companies are usually the ones that are already financing you, remember that they live from lending money and they will not want to lose one of their clients, they may exonerate several of the charges through a written agreement.
You Can Get Cash Through the Refinancing of The Mortgage
Considering that response times are usually short, mortgage refinancing can be qualified as quick cash loans. It works in the following way.
The threshold that exists between the balance in credit debt and the value of the property is called “capital”. When the refinancing is greater than the capital, this difference can be requested in cash.
However, when this procedure is carried out, the debt for the property increases. In other words, the value of the house falls and it takes years to reach the same state. If there is an intention to sell the property, the money obtained from such sale will be notably less than the real value of the home. It is a risk that needs serious consideration.
How To Find the Best Refinancing Option
It is not easy to decide on such a delicate matter, refinancing a mortgage may be the best option in the face of the need for money. Many people choose to go to companies like CitiBank to get the amount they need.
Others prefer to visit loan sites such as Financial Support to get lower sums and thus get out of trouble. But mortgage refinances can provide the solutions they need and the payment installments are more flexible.
To obtain a good business during the refinancing process it is necessary to investigate in different real estate and banking entities or consult as many experts as possible. They make their living by lending money, and you need it. Let them know you are looking for the best offer, applying this simple council could be worth getting better personal or mortgage loan rates.
If the mortgage loan that is currently managed has a variable interest rate, it can be established as a goal to improve the conditions, perhaps through a lower interest rate, moderate interest rate ceilings along with the loan or reduced annual interest adjustments. The best case will be to obtain a fixed interest rate.
Beware of Refinancing Without Cost
Some vendors say they offer new financing without additional costs. The truth is that these promises tend to be tempting traps. There is no refinancing without costs and there are usually two cases:
- Case 1: the lender covers all expenses and charges them by interest
- Case 2: the charges of the procedure are part of the loan and are transformed into the money that is being received as capital
To avoid cheating or misunderstanding ask your lender to show you in detail the amounts of each of the installments, as well as the percentage that corresponds in each to the interest and capital of the loan.
Modify the Payment Period
Among the adjustments that a mortgage refinance allows is the possibility of altering the time it will take to pay the loan. In case of increasing the period of the installments, you will be able to pay much less monthly, which will allow you to have a more comfortable budget and fully cover your needs, however, the interest will increase notably for delaying so much time paying.
On the other hand, decreasing the period of the installments will enable you to conclude early with the payments of your personal loans and reduce your monthly fixed expenses once the loan is paid, besides the interest rates will be reduced.
You should consider that by doing this, the amounts of the monthly installments will increase even getting to double the fees that you have been paying. This option is only admissible in case of a favorable economic change.
It is Completely Your Call
There is no one better than you to determine when you need money.
Remember that refinancing a mortgage means starting a credit period again. Evaluate cold-headed options to know if you are looking for that or if what you need is a personal credit. Maybe a friend can help you if the figure is not high and you return it soon.
Creditworthiness is at stake, when quotas are not met it is not time to ask for refinancing, the new terms will be worse than the previous ones unless you get the best loan companies.