Refinancing a mortgage is when you take out a new loan to cover your original mortgage loan. There are many advantages to this process, such as lowering the interest rate and reducing monthly payments. Since the lender will have legal representation during this process, it's valuable to have an attorney on your side as well. This guide will walk you through how the process works, the advantages, and the factors to consider.

How Does Refinancing a Mortgage Work? 

The process is highly similar to getting the original mortgage. You shop around for a loan from various lenders, comparing terms and interest rates to find the best offer. Next, you see if the new loan is better than the current one. If your credit score has improved since the original mortgage, you may qualify for better terms.

What Are the Advantages? 

First, refinancing can lower the interest rate by shortening the loan term. For example, 30 years may go down to 20 or 15 years. This will lead to significant savings on interest. Another option is to lengthen the loan term, lowering the monthly payments. For example, 20 years can go up to 30. 

If you’re worried about market fluctuations, and the loan has an adjustable rate, switching to a fixed rate will prevent variations in the amount you owe. 

What Factors Should You Consider?

Throughout the process, keep an eye on the closing costs. If refinancing requires a $4000 upfront payment, but the new monthly payment is just $50 below what you’re currently paying, you’ll need to live in the home for years before the refinancing process pays off. If that’s the case, consider another lender to see if they offer better terms. 

Finally, consider how refinancing will affect your credit score. Each time you apply for a mortgage loan, a hard inquiry will be made on your report, potentially lowering your score by a few points. If you’re already struggling to get loans, it may not be the right time to refinance. 

When you need an attorney to oversee the refinancing process, contact Bernardini Law. Serving Essex County, MA, they will represent your legal interests, making sure the legal documents and processes are conducted in accordance with the law. They’ll also provide advice about refinancing, including how to get the best terms. Call (978) 794-5525 to schedule a consultation with an attorney, or head to their website to learn more about their services.