How To Refinance Your Home (The Right Way)

How To Refinance Your Home (The Smart Way)



“The Amortized Chart”


Amortized chart:


The Amortized Chart is a table that shows each periodic loan payment that is owed, typically monthly, and how much of the payment is designated for the interest versus the principal. In short,

it shows the length of a loan and the difference between when you are paying interest and when you are actually paying for the house itself.


1% saving or don't refinance:
This rule is great to go by Due to the fact that mortgages are amortized. Refinancing to save 1 percent is often worth it. The reason this is, is because a one percentage point is a significant rate drop, and it should generate meaningful monthly savings in most cases.
For example, dropping your rate 1 percent – from 3.75% to 2.75% – could save you $250 per month on a $250,000 loan. Which would translate to nearly a 20% reduction in your monthly mortgage payment.
That 20% monthly savings can be put toward daily living expenses like, emergency funds, investments, or even paid back into your mortgage to pay the loan off early and save you even more in interest.





Three ways to refinance your home:


Option one: reduce your interest rate which will reduce your monthly mortgage.

Option 2: shortens the mortgage length by continuing to pay the same amount with a lower interest rate.

Option 3: take cash out and reinvest it into other assets but be required to pay slightly more. By getting a 80% loan on the 400k over the course of 30 years. Which makes you pay slightly more 1349$ but gives your cash back that you can use to buy other assets to build wealth.


Now that you know the 3 options you can do when it comes to refinancing its time to learn how to actually refinance your home.

How to actually refinance your home:

Weather it be the lowering your interest rate, shortening the length of the loan,
Or cash out for home improvements or debt consolidation.
Once you determine what option works best you then must get with a loan originator or mortgage advisor. The documents you will need are things like income and asset documentation, and they also may require things like mortgage statements, tax statements depending on your situation. If everything checks out then they will move forward with your electronic signing and disclosure of your application. Once they collect your electronic signature you then move on to the processing stage. If it's required a loan processor can order an appraisal, a title search, and a lien search to make sure that there are no outstanding liens and they know about all the mortgages tied to your property.

After that they then send your loan in for a preliminary underlying approval, this is when an underwriter looks over and double checks the documents and data collected against you. The underlining approval is done twice back to back. The second time is called The final underwriting approval or clear to close.
In the clear to close process your file will go over to the closing department, the closing department is responsible for coming up with the closing disclosure or what is called the CD for short. The CD will have all the final numbers all the way down to the penny. By federal law the closing department is responsible to have the CD sent over 3 business days prior to your closing date.

When it comes to the closing procedures someone from a title company or an attorney's office will reach out to do your closing, there is something called an express hybrid e closing which allows you to sign the closing documents digitally on a phone or on a computer digitally.


Once the documents are signed there is a 3 day waiting period on occupied homes before they actually disburse the loan out. The reason there is a 3 day wait period is because it gives you time to go over the loan and back out from the loan if needed.

If it's an investment property or second home then the loan will fund the day of the signing.

The last step is the funding of your loan, this is when they send a wire transfer to your mortgage company to pay off your loan in full.

Usually refinancing takes 15- 20 business days to refinance from start to finish.




How to pay closing costs:

The first option you have when it comes to paying closing costs is to pay out of pocket. Or in short write a check. Most first time refinancers believe this is something you have to do which is not the case. The good news for you is that there are other options like,
Rolling the closing cost into your new mortgage. This means that you won't have to pay out of pocket, and can instead make monthing payments towards your closing costs by just paying your mortgage.

Another option is the lender paid closing costs. In this option the lender offers to pay your closing costs in exchange you are willing to take a slightly higher interest rate.
The best way to determine which option is best for you is by determining the reason for the refinance as a whole.