Home refinancing is a process where a borrower takes his or her current mortgage loans in Orinda and changes it to a completely new loan. The new loan can be with the same lending institution or with another lender altogether. There are a number of reasons to refinance a mortgage loan; chief among them is to save money and to pay off the mortgage faster. Banks, credit unions and other lenders offers refinance mortgage loans in Orinda area but like the original mortgage, the borrower has to meet a certain criteria before the new loan can be completed. It is important that the new lender is comfortable knowing the loan will be repaid, the process protects everyone involved.
Reasons for refinancing:
Mortgage loans in Orinda include two extremely important factors; the term of the loan which is the length of time in which the loan will be paid off and the rate of interest. In many cases refinancing is done to change one or both of these key factors. Mortgage loans are always set for a period of years; commonly the terms are either 15 years or 30 years. Many people refinance their loan to either shorten the term or lengthen it if they wish to either pay off the loan faster or to reduce their monthly mortgage payments.
When the home buyer first takes out a mortgage loan there may be a choice of either a fixed rate mortgage or a variable rate mortgage. If the borrower opts for a fixed rate mortgage and then the interest rate drops significantly, refinancing can lower the interest rate which in turn reduces the total owing and it can reduce the monthly payments as well.
Look at a fictitious situation; if a borrower had a 30 year fixed rate mortgage at 8 percent interest and a loan of $100,000 and the interest rate fell to six percent the savings would amount to over $48,000 over the life of the loan. As you can quickly see, a couple of percentage points can make a huge difference.
An adjustable rate mortgage has an interest rate that changes based on changes in the credit markets. An adjustable rate mortgage can go either up or down. If the rate drops that is good, if the rate increases the borrower might consider switching to a fixed rate mortgage.
As well as changing the term of the existing mortgage loans In Orinda or the interest rate, may people use refinancing as a way to pay off other high interest rate loans. For this to happen the home must be worth more than the outstanding loan amount, it is also a source of cash for a home remodeling project.
