Monday, May 10, 2010

Refinance Home Loan FAQ's

It is important to know exactly what to expect when applying to refinance home loan or mortgage loans. Here are some FAQ's or frequently asked questions and concern about how to refinance home loan or mortgage loans.

Refinance Home Loan FAQ

Q. What are the benefits when you refinance your home loan?
A. Refinancing allows many homeowners to lower monthly mortgage payments by reducing their interest rate, extending the loan repayment period or a combination of both. It also allows you to lock in a steady mortgage rate that won't go up or down over time if you select a "fixed" interest rate.

Q. Can I obtain additional funds when I refinance my home loan?
A. Yes, if you have extra equity built up in your home it is often possible to obtain a "cash-out refi" that provides cash at closing. The additional cash can be used to pay off high interest credit cards or car loans, put a child through college, remodel your home, take a vacation or almost anything else you desire. A cash out refinance is not available to everyone; in general you will need a substantial amount of equity in your home and above average credit in order to qualify. In some cases you may also need to begin paying PMI if you take too much equity out of your home, so explore your options carefully.

Q. Do I need equity in my home to refinance it?
A. It is possible to refinance a home loan with little to no equity but not all lenders write this type of loan. Much depends upon your individual situation, credit score and the value of the home.

Q. Do I need a new appraisal and survey if I want to refinance my home loan?
A. Yes, in most situations the lender will require a new and up-to-date appraisal and survey on the property prior to writing a new loan. If your existing survey is recent and no improvements have been performed on the property it might be possible to use an existing survey but it depends upon the lender.

Q. Is it better to modify my existing loan or apply for a mortgage refinance?
A. It depends. While some people may benefit from modifying an existing mortgage, most lenders usually extend the repayment period while adding interest without adding additional fees or closing costs associated with mortgage refinance. On the other hand, if you refinance your mortgage, you may be able to get reduced interest rates. Use an online mortgage calculator to compare the costs of each type of refinance home loan procedure.


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