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How Does It Work To Refinance Your Home? | Omaha NE Homeowner’s Guide

Mortgage rates go up and down based on market conditions, but there are times when a refi works for you.

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What is a refinance?

A refinance is paying off your current loan with a new loan. It is not a renegotiation of the existing loan terms and a homeowner does not need to use the same lender that currently holds their loan.

Why would I need to refinance?

There are many reasons someone would refinance their home loan. The most common reason is to lower the interest rate. A homeowner might also want a shorter loan term or may need to take additional cash out with the equity they have built in their home. Refinancing can also remove a person from an existing loan.

What are the cons of refinancing?

The biggest con to refinancing is the cost. While it usually does not cost as much as a purchase, a home loan refinance will always have a cost. Any lender that says there is no cost is “rolling the cost in the loan” which means they are including the cost in the rate. A refinance can be structured in several ways to fit a borrower’s needs. Another con is the loan terms. If you’ve been paying on your 30-year loan for 10 years and you refinance into another 30-year loan you will likely lower your payment but your loan will be a new 30-year term.

How do I know if a refinance is right for me?

That is easy. Contact a Loan Officer and tell them your goals. Are you concerned about your payment? Or do you want to get the loan paid off sooner? Perhaps you want some cash out for debt consolidation or for home improvements. A good Loan Officer will be able to guide you and, if needed, tell you it is not a good idea.

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