Refinancing your home mortgage means to pay off the current loan on your house by signing up for a new one. There are a few reasons why people may refinance their mortgage.
- Debt consolidation
- Invest in a business venture
- Purchase a second home
- Pay for a wedding or new baby
A refinancing mortgage can help pay for many different life events. When refinancing your home you can access up to 80% of the available equity in your home. If your home is worth $500,000 and you have paid off $200,000 that $200,000 is the equity in your home that is available to you and you can pull out 80% of your equity equaling $160,000.
There are other reasons to refinance that don’t involve pulling equity out of your home. Refinancing is also a great idea to lower interest rates or sign yourself up for a new mortgage product. This could mean changing the term of your mortgage or changing from a fixed to a variable rate. Mortgages are products and have different benefits to them. Knowing your benefits can help you upgrade during a remortgage.
The Costs Associated With a Home Refinance
There are 6 common fees involved in refinancing your home. While these fees will help you understand what is involved in a home refinance you may run into more or fewer fees on your home and each situation should be looked at by a specialist to give you the best cost and understanding if refinancing your home is the right move for you.
- Application fee– $200 to $500 on average
- Appraisal Report– $300 – $600 on average
- Original Loan Document Preparation Fee– Typically 1% of your loan amount
- Flood Certification– Only applicable in some locations at a cost of $50
- Title Search and Insurance– Up to $800
- Recording fee– Up to $250
While these fees may sound hefty most of them are applied to your new loan or folded into your home refinance and can be paid off with the money you save on the interest rate of your new loan.
Cutting your mortgage by .75% can save you a large amount of money depending on the size of your home loan. For a home worth $200,000 a mortgage rate drop of .75% will save you an average of $90 a month on your mortgage payment. Over the life of your loan that amounts to thousands of dollars. Talk to a mortgage specialist to understand if refinancing your mortgage is the right move for you or click here to learn more.