Refinancing your mortgage loan gives you the opportunity to reduce your monthly payments. But, there are several steps and processes you need to go through before you can finalize a mortgage refinancing. First, you need to determine how much equity you currently have in your home. Doing so enables you to determine if going through the refinancing process is something worth your time.
What many people fail to realize is that even when your home loan remains the same after refinancing.
Your actual equity still has the odds of decreasing or increasing. In what direction your equity goes depends on various factors. First, you’ll need to get an appraisal of your home to begin the refinancing process.
The current value of your home is compared against similar properties in your area during this process.
Determining your home’s current market value gives lenders the ability to provide you with the best-refinancing terms. That’s just the beginning; there are several other steps involved in the refinancing process.
Suppose you’re interested in refinancing your home but don’t know where to start. Contacting a lender like Altitude Home Loans can give you some solid footing. To learn more about refinancing your home, continue reading.
Do you lose equity when you refinance?
As we stated earlier, refinancing your current mortgage leads to the possibility of a gain or loss in equity. Whether you lose equity in your home when refinancing depends on the original loan amount and how much you refinance for. Most lenders like Altitude Home Loans allow you to cash out on any principal amount when refinancing.
If you choose to do so, you’ll lose up-front equity. But, you can use that money to make improvements to your home that increase its overall value. By doing so, you can actually raise the amount of equity in your home. The interest rate of your new refinance also impacts your equity.
Suppose your lender allows you to transfer your closing costs to your new loan. This is another instance in which your equity would decrease. You’ll need to sit down with your lender to discuss the exact details of your refinance. Doing so will allow you to determine how much equity, if any, you’ll lose.
Refinancing your home safely with a lender like Altitude Home Loans
To make refinancing worth it, you’ll need to sit down and create a comprehensive breakdown of your finances. Gather all of your recent income reports, check your credit score, audit your debt, and look at your savings. Gaining a clear picture of the progress you’ve made paying off your home is essential when refinancing.
Check with multiple lenders before proceeding with your refinancing application. So, you’ll be able to see who’s offering a deal that fits your desires precisely. You may also need to contact your current mortgage lender to get information about your existing loan.
People Also Ask
Q: How does refinancing work with equity?
A: refinancing means you’re taking out a new loan against your original loan. Many people do this to get a lower interest rate compared to what they’re currently paying.
Q: Why should you never refinance?
A: recouping the closing cost on your newly refinanced loan takes a lot of time. This is one of the primary reasons you should avoid refinancing your mortgage.
Q: How much equity do I need to refinance?
A: Typically, you need 20% equity before you’re eligible to refinance. With a good credit rating, you can still refinance with less than 20% equity.
Understanding the answer to, do you lose equity when you refinance?
Using these tips, you can figure out a way to refinance your home with minimal equity loss. Do some research online to find reputable lenders like Altitude Home Loans in your area. Then, give them a call to discuss your desires as it relates to refinancing your home.