What does refinance literally mean? I'm trying to do that w/ my house but is my original loan paid?

Question

What does refinance really mean? I'm trying to understand this. I'm a first time home buyer, been in my house for almost 2yrs. and have to refinance before mortage rate gets adjusted. As of right now, I'm in an adjustable rate. Trying to refinance to a fixed rate.

Answer 1

Refinance means you are taking out another mortgage on your home, hopefully at more favorable terms, to pay off your existing mortage.

Basically, most people do this to lower their payments, take some money (equity) out of their home, or even both.

Answer 2

When you refinance, your original loan is paid off.

Remember, when you refinance, you pay closing costs again (appraisal fee, loan origination, taxes, etc.) so you don't want to refinance too often - or the savings on the interest rate will be wiped out by the additional costs. Since you have been in your house 2 years, it is probably OK if you interest rate is about to reset to a fairly high rate. There are calculators you can use to make sure it is going to be worth the cost and trouble of refinancing. Try this one: http://www.pattiannkasper.com/mortgage_calculators_50163.html

Average 30 year fixed rate loans in the Minneapolis / St. Paul area are going for about 5.87% today according to Bankrate.com. So the rates are good now.

I hope that helps!

Answer 3

You might need to get out from under an adjustable mortgage and into a fixed rate loan. The loan that you owe now will be paid off. The new loan will consist of the amount paid off plus the cost of the refinance. Sometimes that can be high. A good appraisal with a good debt to income ratio will get you a good rate and a good credit score will add to it.

Answer 4

Your rate before it became adjustable was probably very low. A fixed rate is a great option in this market. You have many options available to you. Be aware of the 1%-1.95% start rate loan. This loan is the worst loan you can get in this market unless you are an investor. If someone quotes you a payment lower than what you were previously paying, be aware. Ask them if this loan has negative amoratization, meaning if you don't cover the interest on your loan with the payment you choose, the remaining balance will be added to your entire loan amount. Please let me know if you would like my assistance in your refinance. Have a great day.

Answer 5

REfinancing is getting a new loan on your home, generally with better terms than the previous one.

You can refinance to change the rate and term of your loan or to get cash out, consolidate debt etc.

Your original loan is paid of in a refinance. You start over with a new loan.

Hopefully you have not lost any equity and can convert to a fixed rate loan.

Good Luck

OBA™

http://www.Ineedafixed.com

Answer 6

Refinancing to a fixed rate now would be a great idea because interest rates are very low. If you stay in the adjustable your monthly payments will change as interest rates change. It would be best to go fixed so you can lock in your rate and keep your payments the same. That way you don't have to worry as much about defaulting on your loan. They are probably offering you a fixed rate because you have kept up to date on payments and they feel you are a good customer. Your original loan is not paid. They will readjust your principal though to what you have left to pay.

Answer 7

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