What Do You Need to Know About Refinancing Your Chicago Mortgage?
The mortgage is probably your biggest monthly bill, so it makes sense that you should periodically evaluate it to make sure it is meeting your needs. You might be able to get a better deal that would save you money every month, or use your mortgage as a way to consolidate existing debt or borrow money for upcoming financial needs. Before you jump into the refinancing process, take a few minutes to understand when you might want to refinance and how the process works.
When should I refinance my mortgage?
First, and perhaps most importantly, you should consider refinancing your mortgage only if you are planning to keep your new mortgage for at least 2 years or more. Closing costs on a mortgage refinance are lower compared to the mortgage closing costs when you purchased your home, but it could still take you several months to recoup these costs through lower monthly payments or lower interest rates.
The best time to refinance your mortgage is when market interest rates are lower than the rate you are currently paying, and that they are not projected to go down in the near future. Also, you may qualify for an interest rate lower than you are currently paying if your credit score has improved since obtaining your original mortgage.
In addition, if you put down less than 20% when you purchased the home, you were probably required to have mortgage insurance (PMI). By refinancing, you may be able to eliminate your PMI sooner than we are able to just cancel your PMI. PMI automatically cancels when your loan balance reaches 78% of the original sales price or value, whichever is lower.
If you have an adjustable rate mortgage (ARM), it can be wise to consider refinancing right before your payments are about to increase. Refinancing to a fixed rate mortgage can give you the security of a set monthly payment for the duration of your mortgage.
Another good time to refinance is when you have home equity and want to add debt to your primary mortgage through a cash-out refinance. Rather than getting a home equity line of credit or home equity loan, you can refinance your mortgage to secure a low interest rate on money for things like home improvements or education.
How do I refinance in Chicago?
1. Contact a lender to start the process of refinancing. United Home Loans in Chicago is a family-owned firm that acts as both a lender and a broker to help you find the best rates for your mortgage refinance. Our bankers have years of experience and take the time to answer all of your questions, such as “When should I refinance?” and “What type of mortgage is best for me?”
2. Provide the lender information about your current mortgage, including the amount you owe, your interest rate, how many payments remain and your monthly payment amount.
3. Compare options on different types of mortgages to possibly use for refinance. You will need to select the number of years in your repayment term and choose between a fixed rate and adjustable rate mortgage. For each option, look at the monthly payment amount, the total amount of interest you will pay over the life of the loan and the amount of your out-of-pocket closing costs.
4. Lock in the interest rate on the type of mortgage you have chosen so you are guaranteed to have that rate at closing, even if market rates go up.
5. Fill out the formal mortgage application and provide your loan processor with all required paperwork. This will include recent pay stubs, W-2 forms and bank account statements. Stay in touch with your loan processor to ensure a smooth closing, and find out how much money, if any, you will owe at closing.
6. If you have any questions about a mortgage refinance, contact United Home Loans below.