Committed to World Class Service
Community First National Bank - McAllen, TX
Committed to World Class Service

Refinancing Your Mortgage

Refinancing Getting a new mortgage to replace the original is called refinancing. Refinancing is generally done to allow a borrower to obtain a better interest term and rate. The first loan is paid off, allowing the second loan to be created, instead of simply making a new mortgage and throwing out the original mortgage. For borrowers with a perfect credit history, refinancing can be a good way to convert a variable loan rate to a fixed and obtain a lower interest rate. Borrowers with less than perfect, or even bad credit, or too much debt, refinancing can be risky.

What Is Refinancing?

Refinancing is the process of obtaining a new mortgage in an effort to reduce monthly payments, lower your interest rates, or change mortgage companies. Most people refinance when they have equity on their home, which is the difference between the amount owed to the mortgage company and the worth of the home.

What Are the Advantages of Refinancing?

One of the main advantages of refinancing regardless of equity is reducing an interest rate. Often, as people work through their careers and continue to make more money they are able to pay all their bills on time and thus increase their credit score. With this increase in credit comes the ability to procure loans at lower rates, and therefore many people refinance with their mortgage companies for this reason. A lower interest rate can have a profound effect on monthly payments, potentially saving you hundreds of dollars a year.

What Are the Risks?

One of the major risks of refinancing your home comes from possible penalties you may incur as a result of paying down your existing mortgage with your line of home equity credit. In some mortgage agreements there is a provision that allows the mortgage company to charge you a fee for doing this, and these fees can amount to thousands of dollars. Before finalizing the agreement for refinancing, make sure it covers the penalty and is still worthwhile. Along these same lines, there are new additional closing cost fees to be aware of before you commit to refinancing.

When Can I Refinance My Home?

Most banks and lenders will require borrowers to maintain their original mortgage for at least 12 months before they are able to refinance. Although, each lender and their terms are different. Therefore, it is in the best interest of the borrower to check with the specific lender for all restrictions and details.

In many cases, it makes the most sense to refinance with the original lender, but it is not required. Bear in mind though, it's easier to keep a customer than to make a new one, so many lenders do not require a new title search, property appraisal, etc. Many will offer a better price to borrowers looking to refinance. So, odds are, a better rate can be obtained by staying with the original lender.
Copyright © 2018 CFNB McAllen
Website designed & hosted by Outdoor Resources, LLC