How to Get a Home Mortgage Refinance Loan
What it is
| At a Glance | |
|---|---|
| Loan Type: | Mortgage |
| Lender: | Bank |
| Secured: | Yes |
A home mortgage refinance loan is obtained by applying for a secure loan intended to replace an existing loan secured by the same assets. Refinancing is usually done to reduce interest costs by refinancing to a lower interest rate, to pay off other debts including credit card debt, to reduce risk including switching from a variable rate or adjustable rate mortgage to a fixed rate mortgage, and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership.
Some types of mortgages contain fine print that dictates penalty clauses triggered by early payment of the mortgage. This usually manifests as a cash charge. Some banks will arrange to pay such refinancing charges in order to obtain a borrower's business. Some refinanced loans with lower initial payments result in larger total interest costs over the life of the loan or expose the borrower to greater risks than the existing loan. Calculating the upfront, ongoing and sometimes variable costs of refinancing is an important part of the decision on whether or not to refinance such as raising property tax after refinancing.
Who it's for
Home mortgage refinance loans are for people who need extra cash, want to take advantage of a lower interest rate, or who want to pay off extra debts. Refinancing is a way to take advantage of smaller payments or take care of more pressing financial needs.
What you need to do to apply
In order to obtain a home mortgage refinance loan, interested applicants will need to contact a local lending institution and inquire about the different options and rates available. Personal and financial history, including a credit report, will need to be made available to the lending institution. A property appraisal may also be required.