Full Details About How Mortgage Refinancing Really Works?

Full Details About How Mortgage Refinancing Really Works?

Let’s talk about mortgage refinances. A lot of people there's a lot of different reasons that people want to do mortgage refinances. Some people want to consolidate debt. Some people want to pull money out to invest. Some people want to pull out money to renovate their homes or sometimes typically, we just want to pull out their equity to buy yet another property. I think it's an important topic and I think it's slightly misunderstood. 

A lot of first-time homebuyers will think that they can almost do a refinance right off the bat. I'll get a common question of “I want to buy a house for $200,000 and hey I have a $30,00 car loan that I also want to pay off can I just add that there”. I think it's important to talk about kind of the basic principles of a mortgage refinance.

How Mortgage Refinancing Really Works?

80% Loan To Value

The number one thing you got to remember with the mortgage refinance. You can only go to 80% of the value of your home. When I write you can only go to 80% of the value really simple math. On a $100,000 house, you can go up to $80,000. The other thing that gets overlooked is that $80,000 has to include the amount you still currently all on your mortgage, plus whatever you're trying to add. It has to get under that $80,000 special there that 80% threshold. Point number one really has to be under or up to 80% of the value of your home.

Appraisal Required

Determine the value of your home you're going to need an appraisal and unfortunately, that's unavoidable. An opinion from a realtor friend or something like that, that does help give you value by looking to sell your house. Unfortunately, banks do need an appraisal from a licensed appraiser. Once we have that value again we can do 80%. Something else to consider is whenever there's new money involved in a mortgage. If you're switching your mortgage you're just up for renewal and you're switching from one bank to the next. That's okay there's no need to get a lawyer involved.

Legal Fees with New Money

Unfortunately, when there's new money involved whenever somebody has to accept money on behalf of the bank, and give it to you or give it to someone else. There are legal fees. Point number three is you are going to need a real estate lawyer to handle those funds. I know I've learned a lot at you 80% might have legal fees. You're going to need an appraisal and then finally if you have a current mortgage of course if you're refinancing you already have an existing mortgage.

Potential Penalty on Broken Team

Something to consider is the timing of the whole thing. Because, if you're breaking your mortgage partly through a term you might incur a penalty, it's something else we need to look at as well. Lots of things to consider I hope that cleared up the mystery the mortgage refinancing. There's a ton of benefits. Especially, if you're consolidating debt there are a million ways that you can reduce your monthly overall expenses.

That's the ins and outs mortgage refinance. I hope you found that helpful if you have any questions feel free to put something in the comments have a good day.

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