When and How to Obtain a Refinance Home Loan

Interest rates are at an all-time low, so you should run out for a refinance home loan. Right? Maybe, but it might not be profitable at all. Take a few minutes to understand how a refinance home loan works, and what it will take to make refinancing a good financial decision.

The first thing to understand about a refinancing home loan is that you’re likely going to go through most of the steps that it took to get the original home loan. Some people think that they’ve cleared the major hurdle when they acquired that mortgage, and that’s true. But you’re going to go through much of the application process all over again when you set out for a refinance home loan.

If you’ve made payments on time during the course of your current loan, you’re going to be in a good position to get a refinance home loan. Your lender is going to know your dedication to making payments and at least that part of the process will probably be easier.

Depending on how long it’s been since your original loan, you may be asked to get another appraisal and home inspection. Surveys aren’t typically required on a refinance home loan, but the appraisal and/or home inspection will cost the same as if you were applying for a primary loan for the first time. Considering that cost along with lenders’ fees, you can see that the refinance home loan isn’t free. If the interest rate you’re applying for is not more than one percent less than the current interest rate, it will take you at least a year or more to save enough on the payments to cover the cost of closing a refinance home loan.

There are times when it’s very profitable to seek a refinance home loan. If you had poor credit when you took out the original loan, you may have taken a higher interest rate or less than desirable loan terms in order to acquire the loan. If you’ve made timely payments for a couple of years, your lender may be ready to give you better rates and terms. This could be a good incentive to seek a refinance home loan.

Also be sure to check out our pages about What Is A Home Equity Loan, Home Mortgage Loan, Home Equity Loan Rates, Home Improvement Loans, and Home Loan Calculator elsewhere on this site.

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