Homeowners refinance their mortgage for a variety of reasons. Many want to lower their interest rates, shorten the term of their loan, consolidate high-interest debt, eliminate mortgage insurance or switch from an adjustable rate loan (ARM) to a fixed rate loan. Whatever the reason, the Busey Home Mortgage lending team is here to help.
The Mortgage Refinance Process
Once you’re ready to refinance your home loan, there are a series of events that must take place before you can close on your loan.
The first step is to submit a refinance application. Your Busey Home Mortgage lender will explain the mortgage programs available, discuss your options, and work with you to complete the application and collect the required documentation.
Within three days of your completed loan application, you will receive a loan estimate detailing the estimated interest rate, monthly payment and closing costs for the loan. Information about any special features related to the loan will also be included.
After we receive your completed loan application, a mortgage loan processor will order the credit report, property appraisal and title search. Once all documents are received and details are verified, the loan will be handed off to the mortgage underwriter.
The mortgage underwriter will complete a thorough audit of your finances and documentation to determine if the loan presents an acceptable level of risk and meets all the required guidelines for the loan program.
Once your loan receives final approved, you’ll review and sign your closing documents. You will receive the Closing Disclosure in your closing packet. The closing disclosure is similar to the Loan Estimate, but it confirms all costs associated with your mortgage loan.
If you’re ready to refinance your mortgage, contact your Busey Home Mortgage lender today.
Lowering Your Payment
Looking to find ways to save extra money each month? Lowering your mortgage payment could help. One of the best ways to lower your mortgage payment is to refinance your home loan.
Lower Interest Rate
One of the most common reasons a borrower refinances their mortgage is to lower their interest rate, which in turn lowers their monthly mortgage payment. If your mortgage interest rate is higher than the current market rates, you may want to consider refinancing your loan. In general, if you can lower your rate by at last 2%, it’s a good idea to refinance.
Eliminate Private Mortgage Insurance (PMI)
If you put down less than 20% on your mortgage loan, you are most likely paying private mortgage insurance. Paying PMI on your loan can add hundreds of dollars to your monthly loan payment. Once you have 22% equity in your home, through monthly payments or an increase in the value of your home, you can ask your lender to eliminate PMI from your loan and reduce your monthly payments.
Extend the Loan Term
By refinancing to a longer term loan, you can spread out your payments over a longer period of time. For example, if you took out a 15-year mortgage or have been paying on a 30-year mortgage for many years, you may be able to refinance back into a 30-year mortgage. This will amortize your payments over a longer period and reduce your monthly payments. This scenario may end up causing you to pay more interest over time, but just because it’s a 30-year loan doesn’t mean you have to take 30 years to pay it off. You can always pay more towards the loan’s principal when you have the extra cash.
Review Your Property Tax
Most borrowers have an escrow account on their mortgage to pay for property taxes. A portion of your monthly payment goes into this escrow account to pay this yearly tax. Your property taxes are based on the tax assessment conducted by your county. If you believe this assessment is too high, you may submit an appeal with the County Board of Review to lower your assessment which would then lower your property tax bill and your monthly payments.
How to Review Your Real Estate Tax Bill
- Look at the assessment you receive from the county. If you don’t have the mailed copy, you can access it electronically at your county website. If you don’t have your Parcel Identification Number, enter the address. It may take several tries find it, as the address has to match exactly how the county has it listed.
- Review your assessment for any inconsistencies. Does the purchase price or recent appraisal match the assessed value? Do you think the value of your home is lower based on recent sales in your neighborhood?
- If you believe the assessment should be lower based on your research, you can file an assessment complaint with your County Board of Review.
- Forms and instructions for filing a complaint can be found on your county website by selecting the Residential Appeal Form.
- There are a few ways to use real data to contest the real estate assessment. If you are wanting a new appraisal, contact your Busey Home Mortgage lender so they can connect you with a reputable appraiser. If you prefer to use recent sales in the neighborhood, contact the realtor who sold you the house, or ask your Busey Home Mortgage lender to connect you with a reputable realtor.
Consolidating and paying off debt from credit cards, student loans, personal loans or other credit accounts through a mortgage loan can be done through a cash-out refinance. With a cash-out refinance, the homeowner refinances their mortgage into a new one with a larger principal amount. The difference between the original, lower mortgage and the new, higher mortgage is given to the borrower in cash. The homeowner then uses that cash to pay off the debts they are consolidating.
If you have enough equity in your home, combining the balances on these high-interest rate debts into a cash-out refinance results in a lower interest rate and single monthly payment, and usually lowers your total expenses for the month.
In order to qualify for a cash-out refinance loan to help pay off your other debts, you must have enough equity in your home to borrow against it. Borrowers typically need at least 20% equity in the home to get a cash-out refinance. The home appraisal, credit history, credit score, income, and other debts and assets will still play a factor in having the refinanced mortgage loan approved.
Talk to your Busey Home Mortgage lender about refinancing your mortgage to help consolidate your debt.
Paying Off Your Loan Faster
Although most borrowers pay their mortgage payments on schedule each month, there are several methods you can use to shorten the amount of time needed to pay off your loan, increase the equity in your home, and save you plenty of money in interest payments.
Pay Extra Principal
In the earlier years of your mortgage loan, the biggest share of your mortgage payment goes to paying interest. By paying a little extra on your monthly payments and applying it to the principal balance, you can reduce the length of your loan and lower to total amount of interest paid throughout the life of the loan.
Switch to Biweekly Payments
Instead of making one monthly payment, split your payment in half and pay it every two weeks. This will result in 26 half payments which is equal to 13 full-sized payments within a 12 month period. That one extra payment per year can save you thousands of dollars and knock off several years on your loan.
Make Lump-sum Payments
If you come into some extra cash, like a bonus, tax refund or inheritance, make a lump-sum payment toward your principal balance to pay off your mortgage loan ahead of schedule.
Contact your Busey Home Mortgage lender to answer any questions you have about paying off your loan faster.