Rates are at historic lows and people are refinancing in big waves. There are many different motivators to refinance, but, some of the more popular ones include: Lowering rate and payment, taking cash out for home renovation or other purposes such as paying off credit card or unsecured debt, divorce with one partner buying out the other, and switching from an adjustable rate mortgage to a fixed rate mortgage.
There are plenty of reasons to refinance into today’s rates with many benefits and little risk.
A refinance to a current mortgage can be very beneficial for many reasons. A borrower can lower payments, take cash or lower their amortization period/term.
Also, there are different programs that allow a refinance without income or asset verification and even waiving of an appraisal. FHA (Federal Housing Administration) and VA (Veteran Affairs) have mortgage programs that allow such refinances.
No income verification needed, no assets to be verified (unless you are bringing cash to close) and no appraisal of the property is required. These are known as “streamline” refinances with the sole goal to lower the rate and total monthly payment.
Other refinancing programs will require the income verification and ordering of an appraisal. one hidden benefit not often realized is that when a refinance closes, the borrower is allowed to skip one monthly payment.
So for example, if you are closing your refinance April 15th, your first scheduled mortgage payment is not due May 1st, it is due June 1st. This can definitely help in terms of immediate cash flow, as you get to save that monthly payment and apply to whatever you want.
Often times, borrowers will be wary of refinancing due to the closing costs, which are 3rd party costs associated with the transaction. A few examples include: escrow, title insurance, notary, underwriting, etc….
A good mortgage broker/lender can obtain “lender credit” and cover these costs so as the borrower does not have to pay them. In essence it is a no closing costs loan, so the upside is huge.
Refinancing has many benefits depending on the motivation of the borrower. Often times, due to lender credit it can have no costs associated with the transaction and therefore even more beneficial as the end result would be lower rate, lower payment, some cash in the pocket and without any cost.