A home refinance can provide a number of financial benefits to you and your family. Whether you are seeking cash out from your equity to upgrade the home, a debt consolidation of various outside obligations, or whether you are simply looking to lower your monthly mortgage payment by extending your loan term or acquiring a lower interest rate, refinancing can provide financial relief in varying forms. While the concept of refinancing may appear simplistic at its face, you should work with your mortgage professional to ensure there is a Net Tangible Benefit (NTB) to your new loan. Essentially, this means that any benefit achieved from executing the refinance should outweigh the costs associated. Most Lenders have certain criteria for measuring the NTB which will assist you in determining whether the new loan is of proper value to you. The steps listed below outline the basic process of a refinance while the very specific details of the transaction will be explained throughout the process by your mortgage professional at North Capital Mortgage.
1. Identify your cause. The first step in determining whether or not you should refinance is to identify the reason. The three main reasons to refinance are 1) Cash Out, typically done to finance a home remodel or to pay for other family expenses 2) Debt Consolidation, typically done to consolidate personal debt such as student loans or credit cards 3) Rate and Term refinance, generally executed to lower your monthly mortgage payment by taking advantage of a lower interest rate, or to extend the term of your mortgage. There are other reasons to refinance which will offer a NTB but the ones listed above are of the majority.
2. Determine the Net Tangible Benefit. Once you have identified your reason for seeking a refinance you should determine whether the NTB exists. Does the benefit outweigh the costs associated? When we refer to costs we generally consider financial costs; however, costs can also be analyzed in other ways. For example, many times a rate and term refinance involves extending the term of your mortgage which means even though your personal monthly cash flow may increase as a result of the refinance, you may be paying on the loan longer than the original term. These concerns, and any others, can possibly be remedied with different loan options and you should discuss the NTB with your mortgage professional to ensure the refinance is to your financial, and lifestyle benefit.
3. Process the Application. A brief telephone application can be administered by North Capital Mortgage in just minutes. Once we understand the type of refinance you desire we will request certain personal documents such as income documents, identification documents, and others to accompany the application. We will gauge the NTB of the file and discuss with you the pre approval options for your refinance.
4. Submit the Loan to the Lender. Once the application has been reviewed and pre approved for the refinance loan and you have determined that the transaction is of value, we then submit the file to the lender. Once submitted, the lender will process the loan and along the way will likely request certain updated documents from the borrower to complete the file package. Disclosures will also be signed which identify the specific costs associated with the loan, the interest rate, and the APR. Here you will also see the new monthly payment, new loan amount, and the new term of the loan. The complete process of the refinance typically takes approximately 30 days. Loan docs will be signed just prior to the close of escrow and once completed, any funds due to the borrower or debt to be consolidated will be executed to complete the refinance transaction.
