Midland Rate-and-Term Refinance

In the process of repaying your Midland mortgage loan, there may come a time when you wish you could modify the terms. You may need more time to repay the loan or want to take advantage of the lower interest rates. 

At Capital Home Mortgage, we can make these changes happen for you through a rate-and-term refinance. But what exactly is a refinance, and how does it work? Let’s break it down.

Rate And Term Refinance: The Basics

A rate and term refinance is a type of refinancing that allows you to replace the existing loan terms with new ones that better suit your needs. When you refinance, you take out a new loan, pay off your current mortgage, and then start making payments on your new loan. With a rate and term refinance, you may switch to a longer or shorter loan term, a lower interest rate, or a different monthly payment.

When determining whether to grant you credit and under what conditions, potential lenders consult your credit report, which contains your financial information and debt repayment transactions, including:

• Identification details

• Credit application details such as credit card applications and mobile phone payment plans

• Current credit cards, debts, and loans

• Credit repayment history

• Defaults, bankruptcies, debt agreements, and credit infringements

• Missed utility and phone payments (more than 60 days overdue)

Check your credit report to ensure it’s correct and up to date. Only apply to refinance your home loan once you have verified that the information is accurate and complete.

How much does mortgage refinancing cost?

Here’s an overview of the potential costs of refinancing  your mortgage:

• Loan origination fee – 0.0% to 1.5% of the loan amount

• Appraisal fee – $500 to $700

• Title insurance fee – more or less $1,000 depending on the loan amount

• Credit report fee –  $50 to $80, but may be paid by the lender

• Prepaid interest charges – the amount of your first month’s interest

• Recording fee – cost varies by county

• Mortgage points – one point is equal to 1% of the mortgage loan amount (more points means lower interest rates)

Pros and Cons of a Rate-and-Term Refinance

Refinancing can be one of the best financial decisions, but you should analyze the decision from all sides. You need to carefully weigh the pros against the cons of refinancing to ensure it’s the best choice for you. 

Rate-and-term refinancing offers the following advantages:

• Access lower interest rate – 

Securing a lower interest rate than you are currently paying will save you thousands of dollars throughout your mortgage.

• Lower monthly payments – 

Lower interest rates should result in lower monthly payments (unless you opt for a shorter repayment period). Your payments will decrease even more if you refinance for a longer term. 

• Get out of debt sooner – 

A shorter mortgage term will allow you to pay off your mortgage faster but expect higher monthly payments.

• Eliminate PMI – 

Once you have 22% equity in your home, the law requires the lender to drop private mortgage insurance. If your house has increased in value since you bought it, refinancing will show you have more equity than you initially thought, and you’ll be able to stop paying PMI.

However, the following drawbacks might change your mind or hurt your chances of getting approved:

• Eligibility  

Refinancing often requires a good credit score, a low debt-to-income ratio, and substantial equity, making it inaccessible to some borrowers.

• Closing Costs 

You’ll have to pay closing costs when refinancing, like when you got your first mortgage. 

• Appraisal

You must go through the appraisal process once more with a rate-and-term refinance, which will take time and money. Moreover, your refinance application may be rejected, or you may pay a higher rate if the appraisal finds that your home has decreased in value.

Is Rate-and-Term Refinancing a Good Idea?

You might be looking at spending thousands of dollars once you add up all the fees and costs related to refinancing your mortgage. So how can you tell if refinancing your mortgage is worthwhile?

Although the exact answer will depend on your particular circumstances, it comes down to what you hope to gain from refinancing. If refinancing results in significant savings or more affordable monthly payments, it could be worth it.

Analyze your circumstances and financial situation to determine whether refinancing makes sense. It all boils down to finding an approach that suits your needs. 

If refinancing is the best option, contact Capital Home Mortgage at (432) 218-4828 to get started. We’re ready when you are.