The choice to refinance home loan is a major decision for most people. There can be many reasons for restructuring the home mortgage–the details are unique to each individual borrower. Certain common things apply to all home loans–refinanced or original loans. These aspects of the prospective loan should be review and thoroughly understood by the borrower and should be made clear by the lender or broker who is handling the details of the loan. Look for answers to these questions and make certain to get them answered satisfactorily before proceeding with the refinance.

What can the proceeds of the loan be used for?

If you arrange for cash out when you refinance home loan, the cash can be used for any legal purpose. Homeowners often decide to do extensive remodeling or renovation to the home. The funds may be used to send a child to college, or to pay heavy medical expenses. Sometimes cash is used to reduce the amount of unsecured debt, particularly debt with high interest rates attached. Funds have been used to start a business or to invest in interest bearing vehicles that will yield enough income to offset the cost of the loan interest and fees.

How long does the processing take?

The length of time to allow for the home loan refinance to be completed can range from days to weeks. Generally speaking, the longer it takes to process the loan, the less likelihood of the loan going through. Sometimes less than scrupulous lenders will drag out the process for an inordinate period of time so that they will be able to collect the loan finder’s fee. The important thing is to try to prepare as thoroughly as possible before beginning the process. This can include researching lenders, correcting a credit report and assembling needed documentation.

How much can I borrow?

The amount that you can borrow depends on the market value of the house, the type of loan that you apply for and the equity that is available. The refinance home loan amount can also be affected by your credit score, the general economy of the region and the nation and by other factors beyond your control. It is true that almost anyone can be financed these days, but the question remains whether you want or should borrow as much as you are eligible to borrow.
Borrowing more than 80% of the value of the home can result in you being charged Private Mortgage Insurance (PMI) as a higher risk loan.

How do I find a lender?

Dozens of lenders for refinance home loan can be found in any large telephone directory and even more if you look online. It is important to be cautious about selecting a lender. Look for one that is experienced and knowledgeable in the type of loan that you will be requesting. A lender that has a good reputation with other clients and with professional organizations such as the Better Business Bureau is a good choice in many instances. If you get a referral from a family member that you trust, that is also a great recommendation.

By: Alan Lim

 

The choice to refinance home loan is a major decision for most people.  There can be many reasons for restructuring the home mortgage–the details are unique to each individual borrower.  Certain common things apply to all home loans–refinanced or original loans.  These aspects of the prospective loan should be review and thoroughly understood by the borrower and should be made clear by the lender or broker who is handling the details of the loan. Look for answers to these questions and make certain to get them answered satisfactorily before proceeding with the refinance.

 

What can the proceeds of the loan be used for?

 

If you arrange for cash out when you refinance home loan, the cash can be used for any legal purpose.  Homeowners often decide to do extensive remodeling or renovation to the home.  The funds may be used to send a child to college, or to pay heavy medical expenses.  Sometimes cash is used to reduce the amount of unsecured debt, particularly debt with high interest rates attached. Funds have been used to start a business or to invest in interest bearing vehicles that will yield enough income to offset the cost of the loan interest and fees.

 

How long does the processing take?

 

The length of time to allow for the home loan refinance to be completed can range from days to weeks.  Generally speaking, the longer it takes to process the loan, the less likelihood of the loan going through.  Sometimes less than scrupulous lenders will drag out the process for an inordinate period of time so that they will be able to collect the loan finder’s fee.  The important thing is to try to prepare as thoroughly as possible before beginning the process.  This can include researching lenders, correcting a credit report and assembling needed documentation.

 

How much can I borrow?

 

The amount that you can borrow depends on the market value of the house, the type of loan that you apply for and the equity that is available.  The refinance home loan amount can also be affected by your credit score, the general economy of the region and the nation and by other factors beyond your control. It is true that almost anyone can be financed these days, but the question remains whether you want or should borrow as much as you are eligible to borrow.

Borrowing more than 80% of the value of the home can result in you being charged Private Mortgage Insurance (PMI) as a higher risk loan.

 

How do I find a lender?

 

Dozens of lenders for refinance home loan can be found in any large telephone directory and even more if you look online.  It is important to be cautious about selecting a lender.  Look for one that is experienced and knowledgeable in the type of loan that you will be requesting.  A lender that has a good reputation with other clients and with professional organizations such as the Better Business Bureau is a good choice in many instances. If you get a referral from a family member that you trust, that is also a great recommendation.

  




By: Alan Lim

 

When the borrower on a home mortgage has come to a position where the terms of the original loan are unacceptable, or more expensive than they need be, given the current economic condition, the borrower sometimes chooses to refinance home loan.  In this situation, the original loan is paid off and the loan is replaced with a new loan the terms of which can be similar or can be quite different. In many ways, a refinance loan is like a brand new loan obtained from scratch since the loan equity, appraised value and capacity to repay must be approved by the lender.

 

Smaller payments

 

When you decided to refinance home loan, you may be able to structure the loan in such a way as to receive payments that are smaller. This can be very beneficial if your goal is to tighten your belt due to a reduction in income.  Sometimes those who are entering retirement years will desire to stay in the same home, but will be living on reduced income, so prefer to reduce expenses to match. Smaller payments on a refinance may be due to a better interest rate that can be gained. If interest rates have dropped enough to offset the refinance loan fees added to a new loan, you may be smart to refinance. 

 

Longer repayment time

 

One of the benefits that can be arranged when you refinance home loan is taking longer to repay the debt.  This is desirable if you want to obtain a larger loan in order to pull out some cash at the time of closing.  It may be for the purpose of lowering your monthly payment.  Spreading out the same size loan over more years means that the interest paid will be greater, but the payment made will be more manageable in size for the homeowner.

 

Fixed payment

 

Another benefit that many borrowers find when refinance home loan with a fixed rate option is that the repayment amount remains the same from month to month. If the proceeds from the home loan have been used to get cash out, it is likely to be cheaper than obtaining personal loans, or maxing out the balances on the credit cards.  Once the loan is set, the payment amount remains the same from month to month throughout the course of the loan.

 

Pay off debts

 

When you receive cash out amount as part of the home loan refinance, there are many uses for the lump sum cash.  You can pay off troublesome debts, particularly those with large interest rates.  This will free up available cash for your living expenses or that you can apply to pay down other debts. A refinance can allow you to pay for future expenses as well, such as covering college tuition costs for yourself or for family members. You can use the funds to renovate or do major repairs on the home that you live in.  You may even use the funds to take a long desired vacation or holiday trip.

 




By: Alan Lim