Why/When to Refinance A Home Loan 

During tough financial times, it’s natural for many of us to need a little extra breathing room for any number of reasons. Some might be able to take on a second job, and others might look to a short-term loan like a title or personal loan to get them over a brief hump. For people with a long-term mortgage, a home refinance can be another great outlet for financial flexibility. Fortunately, American Loans offers comprehensive refinancing programs, including no closing costs programs to refinance a home loan. In this blog post, our home loan experts will cover what it means to refinance a home and why/when you should do so to get the maximum financial impact. 

What Does It Mean To Refinance a Home?

For many homeowners, refinancing a home can seem a bit daunting. But fear not, as it is a process that can ultimately lead to financial benefits. Refinancing a home is when you replace your current mortgage with a new one, typically with different interest rates or repayment terms. This can be done for several reasons, such as securing a lower interest rate or changing the length of your loan to have more financial flexibility. 

When Can You Refinance A Home Loan? 

When wondering how soon can you refinance after buying a home, it’s important to note that you need at least a year of on-time payment history before refinancing your mortgage after buying a new home. This waiting period allows lenders to gauge your financial stability and see that you have been consistent with your payments.

If you’ve owned your home for over a year and have made consistent payments, you can refinance anytime. There is no limit regarding how many times you can refinance a home, as homeowners often decide to refinance based on personal factors. 

Can You Refinance With A Lein On Your Home?

Unfortunately, you cannot refinance with a lien on your property, and you must first satisfy the lien repayment before moving forward with refinancing your mortgage. A lien is a legal claim against your property that creditors can use to recover unpaid debts. Until the lien is paid off, it remains a cloud on the title and prevents you from refinancing. 

How Long Does the Process Take?

While there’s no one-size-fits-all answer, most refinancing deals typically wrap up within 30-45 days. This might seem like a long time, but there are a lot of moving pieces that need to fall into place to ensure the transaction goes off without a hitch. At American Home Loans, we understand you want specific details, and that’s why our agents are on hand to answer your questions and provide you with a more customized timeline. 

Benefits of Refinancing a Home Loan

There are several benefits homeowners can expect when refinancing. They include:

  • Lower Mortgage Payments: Lower monthly mortgage payments are just one of the many benefits of refinancing a home loan. Even a small decrease in interest rates can result in significant savings over the lifetime of your loan. American Loans recommends considering a refinance when mortgage rates are at least two percentage points lower than when you first signed on.
  • Credit Benefits: Refinancing a mortgage is a great way to raise credit. The obvious way this happens is through lower monthly payments, which makes payment deadlines easier to meet and subsequently raises credit. For people whose credit scores are being dragged down by debt outside the mortgage, using the extra money available from refinancing is another great outlet to reduce the strain and potentially raise your credit score.
  • Ability To Leverage Equity: It’s possible to leverage any equity you’ve built up in your home for a number of different financial goals. You can choose to shorten the term of your loan if the numbers work well enough, or you can just pay more each month and finish it earlier. Many people also use their equity for a cash-out refinance where they receive actual cash as part of the transaction— this is perfect for paying down a large debt, sending a child to college, or going on a much-needed vacation.
  • Ability To Alter Loan Format: If you’ve been on an adjustable-rate mortgage but are growing weary of the potentially huge swings in interest rates, know that you’re not alone— and refinancing can be the perfect way to switch to a more stable, fixed-rate loan with a good rate locked in.

Contact American Loans for More Information on Home Loan Refinancing 

When it comes to refinancing your home, the process may seem daunting and overwhelming. But at American Loans, we want to assure you that there is hope for improving your financial standing and achieving your refinancing goals. We value communication and transparency throughout the entire process, ensuring that you understand all aspects of your loan and any necessary steps towards improving your credit score. In fact, our team of experienced brokers is dedicated to helping you, even if you have bad credit! Regardless of your situation, our ultimate goal is for you to achieve financial success and feel confident in your decision to refinance. Contact American Loans today to learn more about home loan refinancing.