When you refinance your home, you are replacing your current mortgage with a new mortgage that has a better rate. Homeowners do this to save money on interest costs.
Since there is a process involved, it is only beneficial to do so if you will actually save money. Determining factors like closing costs, how long you plan to stay in your house, and the new interest rate will all help you decide if refinancing is right for you.
The team at Raleigh Mortgage Group has more than 20 years of experience in the mortgage business and can help navigate the process with you so that you make educated choices about your home loan.
Table of Contents
- What Is Mortgage Refinancing?
- How Does Refinancing a Mortgage Work Step-by-Step?
- Key Benefits of Refinancing Your Mortgage in North Carolina
- Common Challenges and Costs Associated With Refinancing
- FAQs About How Refinancing a Mortgage Works
- Contact Us for More Information on Refinancing in North Carolina
What Is Mortgage Refinancing?
Mortgage refinancing is the process of revising and replacing the current terms of an existing mortgage loan. This is done to save money on payments or improve the loan terms, such as the length of a loan.
When a mortgage refinancing is approved, the borrower gets a new loan, with new terms, that replaces the original.
Why do Homeowners Refinance?
When refinancing is in the homeowner’s best interest, they can save money on monthly payments, enjoy lower interest rates, and have a shorter-term loan. All of these are excellent reasons to explore refinancing in North Carolina with Raleigh Mortgage Group.
What Should North Carolina Homeowners Consider When They Are Refinancing?
When North Carolina homeowners want to refinance, they need to consider the fact that North Carolina law requires hiring a closing attorney. The attorney is responsible for handling the title search, preparing all legal documents, and making sure that the closing follows all state laws.
The Good Funds Settlement Act also needs to be taken into consideration.
This Act requires that closing funds be in a secure form, such as a certified check, wire transfer, or cash, rather than a personal check.
This protects real estate transactions by ensuring that all funds are readily available.
Recording fees are also necessary when refinancing a mortgage in North Carolina. The new deed of trust that secures your new loan must be recorded with the Register of Deeds where the property is located.
How Does Refinancing a Mortgage Work Step-by-Step?
If you’re thinking about refinancing a mortgage, there is a process you’ll want to follow to ensure that everything is done properly.
Step 1: Evaluate current financial situation and goals
Think about your current mortgage payment and what you want to be paying. Determine how long you plan to stay in your home. Consider monthly income and other expenses when refinancing.
Step 2: Shop rates and choose the right lender
Always look for the best rates. Different lenders will offer different rates. You can count on Raleigh Mortgage Group to offer competitive rates when it comes to refinancing your home.
Step 3: Submit application and required documentation
To refinance your home, you’ll have to submit an application. You will need to provide personal identification, proof of income, bank statements, and homeowners’ insurance. You will also need to provide your current mortgage statement and property tax statement. When you work with the team at Raleigh Mortgage Group, we can help you with the process to make sure all the right documents are submitted.
Step 4: Appraisal and underwriting
You will have to have your home appraised. A licensed appraiser will visit your home to look at its features, size, and condition. From there, they will compare your home to recently sold homes in your neighborhood.
Using this information, the appraiser will give a detailed report on the home’s current market value. This is vital because it will impact your loan amounts and options.
Step 5: Closing on the new loan
The final step is the closing of the new loan. You will pay your closing costs and officially pay off your old mortgage. You will receive all of the documents for your new mortgage so you can begin payments on your new loan.
Key Benefits of Refinancing Your Mortgage in North Carolina
There are several benefits of refinancing your mortgage in North Carolina:
Lower Interest Rates
Many people choose to refinance when interest rates are low. Refinancing your home at a lower rate can save you thousands of dollars by the time your term ends.
If rates are not lower, but your credit has improved since you got your first mortgage loan, you may still be able to get a lower interest rate based on your improved credit score.
Shorter-Term Loan
People can save a great deal of money when they have a shorter-term mortgage. Switching from a 30-year mortgage to a 15-year mortgage can save you a lot of money because you can pay off your loan faster at a lower rate.
Lower Monthly Payments
While some people refinance for a shorter term, others look to refinance to get lower monthly payments. Although they may have to lengthen the terms of their loan, they can use the money they’re saving each month for other home expenses. Using a mortgage calculator can help you determine how refinancing will impact your monthly payments.
Change Loan Type
When you refinance your mortgage, you can switch from an adjustable-rate mortgage to a fixed-rate mortgage. This can give you more financial stability and prevent future rate increases that can come with an adjustable-rate mortgage.
Accessing Home Equity
Refinancing can also give you the opportunity to access home equity.
Through a cash-out refinance, you get a larger mortgage that pays off your existing loan and gives you the difference in cash.
This money can be used for home projects, to pay off debt, or for any other uses.
One thing to remember when refinancing…local property value trends play a major factor. It influences your ability to qualify as well as the loan options and terms you can receive.
Common Challenges and Costs Associated With Refinancing
When you’re trying to understand how does refinancing a mortgage work, it’s important to be aware of these common challenges that can come with the process:
Fees & Closing Costs
You’ll have to spend some money to save money. Common costs include:
- Loan origination fees
- Appraisal fees
- Title search
- Credit report fee
- Recording fee
Some people may also have to deal with paying mortgage points to lower their interest rate on their new loan.
Home Equity
If you opt for a cash-out refinance, you take on more debt and reduce the amount of equity you have in your home. If home values drop, you may owe more on your home than its actual worth.
Break-Even Point
Consider your break-even point. This refers to the point when your savings from refinancing cover the closing costs. If you sell or refinance again before you reach this point, you will lose money, and the original refinance will not have been worth it.
Credit Score
When you apply for a new loan, it can cause a small, temporary drop in your credit score.
FAQs About How Refinancing a Mortgage Works
There is no specific “best time” because general market trends typically signal a good time to refinance. The best time to refinance in North Carolina depends on your personal financial situation and goals.
Lenders generally look for at least 20% equity to refinance a loan.
Yes, although your options may be limited. If you still have some equity in your home, a cash-out refinance can be possible or a home equity line of credit.
A refinance typically takes 30-45 days. If you are well-prepared and work with an efficient lender, you may be able to get it done in 15-20 days.
This ultimately depended on your personal financial situation. With current mortgage rates higher and home values up, a cash-out refinance may come with a higher interest rate and may not be worth it.
Contact Us for More Information on Refinancing in North Carolina
Refinancing can help you save money on mortgage payments and pay off your loan quicker. Other people turn to refinancing to access home equity. Whatever the case, the team at Raleigh Mortgage Group is here to help.
As experienced North Carolina mortgage brokers, we understand the process and can navigate the process with you. Contact Us for a Free Consultation to Get Started Today!
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