Pennsylvania Mortgage Refinancing
Why Do People Choose Pennsylvania Mortgage Refinancing?
Homeowners in America refinance their home mortgage loans every day, and they do so for a variety of reasons. The most common reason to refinancing a mortgage in Pennsylvania is to obtain a lower interest rate. According to Freddie Mac, borrowers who refinanced in the first half of 2021 were able to lower their interest rate by more than 1.2% and saved an average of $2,800 in annual payments.
Likewise, over 30% of refinancers were able to shorten the overall term of their loans. Whatever your reason for refinancing, let the finance professionals help you get the best refinance rates for your situation.
What is mortgage refinancing?
Home is a lifelong investment, and through refinancing you can easily leverage that investment. Mortgage refinancing refers to paying off an existing loan and substituting it with some new loan. One of the reasons why homeowners must choose a Pennsylvania refinancing mortgage is to shorten the average term of the mortgage.
It will even help in the raising of funds in a financial emergency or in consolidating the debt. The homeowners must make a wise decision by selecting mortgage refinancing, as it will help in handling the finances effectively.
How does refinancing a mortgage work?
Refinancing a mortgage is a less complex process in comparison to home buying. However, there are several steps in this procedure, and it is not easy to predict how much time this process will take. The refinancing in Pennsylvania has various stages:
- Applying: In this phase, you will review the different types of refinancing options and decide on which will be an ideal option for you.
- Locking the interest rate: Once you decide on the refinance option, you need to lock your interest rate. The timeframe in this stage may differ based on your location, lender, and loan type.
- Underwriting process: This stage begins when you submit your loan application. All the financial information must be verified in this phase, and even minute information must be accurate.
- Home appraisal: Before you refinance your home, there may be an appraisal. The appraiser will help give you a correct estimate of your house value.
- Closing disclosure: After completing the home appraisal and underwriting process, you will get the final numbers for your loan. It will have all the details like loan amount, interest rate, etc. This is when you will sign the paperwork, and once you do that, your refinancing process is complete.
The refinancing of your mortgage can be a great option, as you can change the terms of your loan, lower your interest rate, and cash out your equity.
Factors affecting the mortgage refinance rates in Pennsylvania
Mortgage rates are determined by the market and can change daily. Some of the factors that affect mortgage refinance rates in Pennsylvania are:
- Credit score. Lenders use credit scores to determine the creditworthiness of a borrower. Applicants with higher credit scores are more likely to receive more loan options and more attractive interest rates than those with lower credit scores.
- Down payment. Those who can afford larger down payments often receive more favorable terms than those who cannot. It shows that you’re a lower-risk borrower, and lenders are more likely to offer you better rates.
- Loan-to-value ratio. The loan-to-value ratio is the percentage of the mortgage amount compared to the value of the mortgaged property. For example, if your mortgage is $200,000 and the value of your home is $400,000, your loan-to-value ratio is 50%. Lower loan-to-value ratios usually allow for more preferable rates and terms.
- Loan term. The length of time within which a loan must be repaid is called the loan term. In the United States, 15-year and 30-year rates are common terms. Generally, a shorter loan term results in lower interest rates.
- Market forces. The Federal Reserve rates, mortgage-backed securities, the bond market, inflation, and other economic indicators all impact lender confidence and ultimately your interest rate. It’s important to keep an eye on these indicators if you’re considering refinancing.
- Prime Rate. The prime rate is determined by input from the largest financial lenders in the United States. The prime rate, as determined by these banks, is the lowest rate feasibly available for a certain type of loan.
It is important to focus on all the above-mentioned factors when refinancing your mortgage. They can vastly improve your chances of getting low-interest rate, and it will also be a good start for purchasing a new home. A Pennsylvania mortgage refinancing can be beneficial, and you should consider all the options before making a decision.
What are the new trends that govern the Refinance Rates?
The Federal Home Loan Mortgage Corporation, commonly referred to as Freddie Mac, is a publicly-traded, government-sponsored enterprise. Freddie Mac surveys and tracks rates among the largest mortgage lenders in the United States. Their earliest data for 30-year fixed mortgage rates show rates between seven and eight percent in 1971.
Due to various factors such as inflation and recession, rates have risen steadily over the next decade and ultimately peaked in 1981 at over 16%. As economic indicators improve, mortgage rates have dropped. During the dot-com boom of the 1990s, rates fell under seven percent. Minor fluctuations notwithstanding, rates have dropped slowly through the 2000s and ended the decade at around five percent.
During the 2010s, rates remained relatively low, staying between 3.5% and 5.5%. The 2020s saw rates dive below 3%, and despite a slight increase in late 2020, rates remain at historically low levels. Considering these trends, it may be an ideal time to consider the refinance rates in Pennsylvania.
How to compare refinance rates by loan types to enhance decision making?
Your mortgage refinance rate will vary depending on the type of loan. There are many common types of mortgage refinances, such as:
- Rate-and-term. This is the most common refinancing option. Applicants with good credit scores may be able to obtain preferable loan terms and lending rates.
- Cash-out. This option allows homeowners to take advantage of the equity in their homes. The borrowers would obtain a new mortgage loan for the amount of the previous mortgage plus the amount taken out in cash. Borrowers often use these cash-out funds for home improvements, paying off debt, or investing in other opportunities.
- Cash-in. This option is designed for borrowers who have a lump sum to apply to their mortgage and want to reduce payments or build equity.
- No-closing-cost. If a borrower does not want to pay closing costs at the time of refinancing, this option allows those costs to be rolled into the loan and paid over the life of the loan.
- Streamline. Some FHA loans can be refinanced without borrower credit inquiries, or appraisals.
Each of these options has benefits and drawbacks that should be carefully considered. Regardless of which type of loan you are seeking, mortgage loan professionals can guide you effectively.