Mortgage Refinance FAQ
Nationwide Mortgage Loans delivers the mortgage refinance answers you need for frequently asked refinancing questions. Understanding the mortgage lingo is imperative so you know that you are getting a loan that meets your needs and criteria.
What is a mortgage refinance loan?
A mortgage refinance is a lien in addition to the existing mortgage that already exists on title for the subject property. For most home refinancing transactions, lenders will consider the present market value of a home as collateral as evaluated by a licensed appraiser.
There are several types of interest rates:
- Fixed rate - installment loans on 15, 30 or 40 year terms.
- Adjustable rate- revolving or variable loans in which the interest rates vary based on index.
There are several types of refinance loans:
- Conventional - traditional mortgage
- FHA - government loan
- VA - government loan exclusively for veterans
- Subprime - Alternative loans for bad credit
- Home Equity- 2nd mortgage or credit line
What is a pre-payment penalty?
There is a three day right of rescission for all second mortgage loans unless it is in a purchase transaction.
How much of a loan amount can qualify for with a mortgage refinance?
To get an idea how much you can borrow you need to determine how much equity you have and then you can get an idea of possible cash out opportunities. To determine the Loan to Value, simply take your home loan balance and divide that number by your appraised value. For example, if a home is appraised at $300,000 and your mortgage balance is at $245,000 your loan to value would be 81.6%.
Can I refinance to 100% of my home's value?
At this time most borrowers will qualify for a FHA refinance to 95% with cash out or debt consolidation. If you are only seeking a rate and term refinance then you may qualify for 97% home refinancing. If you are a military veteran, you will likely qualify for a 100% rate and term refinance, but if you need cash out then you will be limited to 90% if you continue to use your VA loan eligibility.
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How are mortgage rates for home refinance loans determined?
Credit scores, combined loan to value and current market conditions determine the interest rates for second mortgage loans. For FHA and VA loans credit scores are not factored if the borrower can demonstrate compensating factors like low LTV, significant assets and low debt to income ratios.
Do I have to occupy the residence I am using as collateral?
You are required to disclose your occupation status whenever you apply for a new loan. You are not required to occupy a home for second mortgages, but the interest rates and loan-to-value restrictions will change for loan against homes that you are not living in. For most 100 and 125% second mortgage loans, occupying the property is a requirement.
How does cash-out refinancing affect my interest rate?
Cash-out refinancing does can affect your 1st mortgage interest rate anywhere from .125 to 1 pt depending upon your credit score and loan to value.