Refinancing might be a good option if you want to lower your monthly mortgage payment or pay off your home loan faster. But what is refinancing, exactly? What are the benefits to you as a homeowner? And what do you need to refinance?
The mortgage professionals at Pacor Mortgage are here to provide an overview of refinancing and help you decide if refinancing is the right option for you and your financial goals.
What is Refinancing?
Refinancing the process of swapping or upgrading your existing mortgage for a new one, ideally with more favorable terms. When you refinance, the new lender pays off your existing mortgage and it is replaced with a new mortgage. Refinancing differs from a second mortgage, which gives you money from the equity in your home.
Refinancing is a key strategy that helps homeowners reach their financial goals. Many people refinance to lower their monthly payments or lower their interest rate. Some refinance to reduce their mortgage term from a 30-year to a 15-year term to pay off their mortgage faster.
What are the Benefits of Refinancing?
- Lower Monthly Payment. This is by far the main reason homeowners elect to refinance. Prior to refinancing, check the most current interest rates (updated each business day) to ensure they are lower than your current rate. A rate one or two percentage points lower than your current rate can make a sizable positive impact on your financial future. There are fees associated with refinancing, similar to those when you signed your original mortgage. However, you can easily recoup those costs by staying in your current home as long as possible.
- Build Equity. Believe it or not, refinancing to a mortgage with larger payments and a shorter term (i.e 15-year versus 30-year) can be beneficial to some homeowners. With shorter mortgage terms, you’re able to build equity in your home faster and if the interest rate is lower, you’ll also save money in the long-term.
- Stabilize Loan Payments. For those with an adjustable-rate mortgage, which is a loan with periodic interest rate adjustments, refinancing to a fixed-rate mortgage will give you a predictable payment each month. If you decided to stay in your home long-term or you want a less-risky investment, refinancing could be the perfect financial switch for you.
- Improved Credit Score. While making your monthly mortgage payment is a necessary evil, those on-time monthly payments help to improve your credit score. A higher credit score puts you in a better position to refinance at a lower interest rate. It also allows for a cash-out refinance option, where you receive money back once the refinance is approved. The extra cash can be used to pay off credit cards or other debts, or can be put into your savings or retirement accounts – all of which can further improve your credit score.
- Pay Off Your Mortgage Quicker. Refinancing your mortgage from a 30-year term to a 15-year term will allow you to pay off your loan and become a homeowner free and clear that much quicker. While you’ll have a higher monthly payment, you’ll save thousands in interest over the long haul. And once the mortgage is paid off, you’ll love feeling more in control of your finances and having that extra income to do with as you please.
Ready to Refinance?
Refinancing your home is a major financial decision; one that shouldn’t be made lightly or without doing research. If you’re weighed the pros and cons and determined that refinancing is the right choice for you, you’ll need to gather documentation.
Here’s a list of what to bring when your meet with your mortgage lender:
- One month (30 days) of your most recent pay stubs
- Two years (2019 & 2020) of your most recent W-2’s and federal tax returns
- Two months of your most recent statements for all bank accounts, 401ks, retirement accounts, and similar asset accounts
- Copy of your driver’s license or state ID
- Copy of your homeowner’s insurance policy or name and phone number of your insurance agent
- Most recent mortgage statement
Additional documentation may be required depending on your unique situation. For example, if you are retired, you’ll need to show your social security or pension being deposited in your bank account and evidence of expected continuance for three years.
With proper documentation, we can paint a clear picture of what type of refinancing option you qualify for and what will best fit your financial needs – both now and in the future.
Pacor Mortgage offers a variety of refinance loan choices, including options that address many of the unique challenges facing homeowners today. Whatever your refinancing needs, we’re ready to help you understand your options. Learn how fast and easy refinancing can be by calling us at 773-881-7744 or visiting our website.
2021 Pacor Mortgage Corp. Pacor Mortgage Corp is located at 14930 Cicero Ave, Oak Forest, IL 60452, Phone 773-881-7744 (Unique Identifier #120945). For Licensing information, go to: www.nmlsconsumeraccess.org. Pacor Mortgage Corp is an equal housing lender and is licensed by the Secretary of State under the Illinois Residential Mortgage Lending Act and is assigned Illinois Residential Mortgage License MB.0000892. Pacor Mortgage Corp branches operate with the following licenses and is assigned Illinois Residential Mortgage License MB.0000892-001, with a Wisconsin License # 260345BA, Palos Heights NMLS 261297 and is assigned Illinois Residential Mortgage License MB.0000892-008, Colorado, Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, California license # 41DBO-67516, Florida MLD1075, Indiana DFI 13177, Maryland 23528, Michigan FL0828, Michigan SR1130, Minnesota MN-MO-120945, North Carolina L-184546, Ohio RM.804151.000, Pennsylvania 43855, South Carolina, MLS – 120945, Wisconsin 120945BA, Kalamazoo, MI NMLS 120945 also DBA Lake Pacor Home Mortgage. This is not an offer for an extension of credit, a rate lock or a commitment to lend. All loans must satisfy company underwriting guidelines and any investor overlays. Any of the advertised products may be discontinued at any time. Information and pricing are subject to change at any time and without notice. Loans are being committed and closed at expressed rates although these rates change and may not be available at time of your lock in, commitment and / or closing. Pacor Mortgage Corp is not affiliated with your current lender, nor is it an agency or extension of the Federal Government, Fannie Mae, Freddie Mac or HUD.