Refinancing a home can be a challenging and grueling endeavor for several reasons. Many homeowners choose to pursue this option in order to pay lower interest rates, reduce their monthly payments, or have sufficient cash for a remodeling project. Mortgage refinance applications in the United States have increased significantly in recent months due to rapidly falling rates.
3 Common Myths About Refinancing a Home Mortgage
You may have been led to believe all sorts of assertions about the refinance process from different individuals or organizations. If you are preparing for your first-ever refinance, it’s important to distinguish which claims about this subject are true and which ones are nothing but common misconceptions. Here are three frequently floated myths about refinancing a mortgage.
You Won’t Save That Much Money
You can actually save a substantial amount of money by refinancing, depending on your existing home loan’s interest rate and what other rates you can choose from today. According to Mortgage News Daily’s lenders’ survey, the average rate for a 30-year fixed-rate mortgage fell to a record low 2.94% on June 10 amid the continued impact of the COVID-19 pandemic on world markets. Average interest rates for many other types of mortgage loans have also been tumbling amid the current recession, so don’t think for a second that you can’t save money by refinancing.
Applications Require Many Documents
Although you may initially feel overwhelmed by the many documents required for a refinance, you will likely notice there is typically very little difference between the amount of documentation that one lender demands compared to another. Additionally, many lenders will often try to help you by giving you the option to sign and turn in documents electronically. Examples of information that you will generally be asked to submit as part of your refinance application include your income, debts, and assets.
You’re Expected to be an Expert
Unless you happen to have extensive experience working in the real estate industry, you are not expected to be an expert about every aspect of the mortgage refinance process. After all, your financial situation can drastically and unexpectedly change from one year to the next (as can the state of the market) and you may be advised to pursue slightly different options depending on these types of variations.
Another often touted myth about mortgage refinancing is the idea that you need at least 20% equity to refinance. Although many loans with less than 20% equity may require mortgage insurance, you can still qualify for a refinance. It’s also a misconception that closing costs can only be paid with cash. In actuality, you can sometimes be allowed to “roll-in” your closing costs (i.e. add them to your mortgage balance).
You should also keep in mind that you won’t always necessarily receive a higher loan amount simply because you choose to refinance. According to statistics compiled by Freddie Mac, 55% of home refinances carried out during the first quarter of 2020 resulted in no change in the loan amount. During this same period, 42% of refinances resulted in a loan amount that was 5% higher than the amortized unpaid principal balance (UPB) of the original loan.
Talk to the Experienced Refinancing Professionals
Speak to the experts at Mathis Title Company in Fairfax, Virginia to learn more about the facts and common misconceptions about mortgage refinancing. We have extensive legal experience assisting lenders, realtors, sellers, and buyers. There are many benefits to refinancing a mortgage, including the fact that you can switch from an adjustable-rate mortgage to a fixed-rate mortgage. You can also consolidate your first mortgage and your home equity line of credit (HELOC) into a single payment or use your home equity for a cash-out refinance.
The team at Mathis Title Company will work closely with your lender and guide you through every step of the refinance process. Also, be sure to take advantage of our refinance special: for a limited time only, our pricing will be $400 in fees plus the title insurance. Call Mathis Title Company today at (703) 214-4020 or contact us online for more information about our real estate services.