What Does it Mean to Refinance?
When most people purchase a home, they get a type of loan called a mortgage to allow them to pay off the total price (plus interest) over a specified time period. After all, most people don’t have a stash of $200,000 (or a whole lot more, depending on the size of your home) lying around to pay cash outright for a home.
It is standard to have a 30-year mortgage in order to keep your monthly payments lower. Of course, this will result in more interest paid over the course of the loan and you may have a higher interest rate than someone who can afford to get a 15-year mortgage.
When you refinance a mortgage in Pensacola, this means you are paying off the existing loan and replacing it with a new loan. While this may seem counterproductive, it can be a smart financial move. Refinancing may be recommended if you want to:
- Take advantage of a lower interest rate
- Lower your monthly mortgage payment
- Change from a 30-year to a 15-year mortgage
- Consolidate debt
- Change from an adjustable rate mortgage to a fixed rate mortgage
- Cash out home equity to pay for a large purchase
Keep in mind that refinancing is not free. You will pay 2%-5% of your loan’s principal (the balance you have left to pay on what you originally borrowed). In addition, you will be required to go through the closing process again, requiring services such as a title search, title insurance, appraisal and application fees. Hiring a title company will ensure all paperwork is processed correctly. You will want to weigh these fees against the potential savings to determine if refinancing is a smart option. Also, if you plan to move out of your home in a few years, refinancing may not be the best decision.
If you are wondering if refinancing is a good idea for your unique situation, the team at Clear Title can help. As a title company in Pensacola, Florida, we help existing homeowners through the refinancing process. Our founder and CEO is Board Certified Real Estate Attorney Stephen R. Moorhead, an expert who has been in the closing business for over 30 years. To schedule a meeting with our experts and explore our Pensacola title services, contact us today at (850) 202-8518 or visit ClearTitlenwfl.com.