Mortgage refinance in Nigeria – Refinancing is an excellent method to protect your house. It offers you a cheaper monthly payment, a lower mortgage rate, and a shorter payout time. You may now be curious as to how mortgage refinancing works. We’ll go over everything you need to know about mortgage refinancing in this article.
Mortgage refinance In Nigeria and how it works
The process of receiving a new loan to pay off your present home loan is known as mortgage refinancing. To put it another way, it requires taking out a new home loan. When you refinance, your bank assists you in repaying your previous mortgage with the new one. After that, you’ll just have one loan and one monthly payment.
People frequently refinance in order to lower their interest rate and payment period. They can also choose to convert some of their shares into cash.
What are the two types of Mortgage refinance In Nigeria?
Refinancing can be divided into two categories. They are as follows:
1. Rate and Term Refinance
You’ll get a new mortgage with a lower interest rate if you refinance your rate and term. You also get a shorter payment period. You can, for example, convert a 20-year mortgage to a 10-year mortgage. You’ll obtain a monthly payment that’s similar to your initial loan if you do it this way.
2. Cash-Out Refinance
This allows you to refinance for cash up to 80% of the value of your current mortgage. Assume your mortgage is worth N100, 000 and you owe N60, 000 on it. Your bank may grant you a cash-out of N20, 000, bringing your new mortgage to N80, 000.
These two sorts of mortgages essentially sum up what they have to offer. You can also get a mortgage loan from either private or state lenders.
How do I go about refinancing my mortgage?
Mortgage refinancing is not as difficult as you may believe. The steps are as follows:
To begin, apply for a refinance with a bank or a loan provider. Following that, the bank will examine your income, assets, and credit and debit scores. This is to see if you meet the requirements for a refinance. Your bank statement and your spouse’s documents (if you’re married) are two key documents that your lender will require.
Furthermore, you have the option of refinancing with any lender of your choice. You might begin by looking for a lender with the best current rate before submitting an application. Read also How to Get Mortgage Loan in Nigeria (Step by Step)
2. Locking your interest rate
If your application is approved, your lender may offer you the option to lock in your interest rate. This will prevent it from rising before the loan closes.
An interest rate lock might last anywhere from 15 to 60 days. In addition, the length of the lock is determined by a variety of criteria, including the loan type, region, and even the lender. If you don’t pay off your loan before the lock period expires, your lender may charge you more to prolong it.
Your lender will start the underwriting process as soon as you submit your refinance application. This step entails your mortgage lender reviewing your information to ensure it is correct. This is done by your mortgage lender to see what possibilities are available to you.
This procedure will also entail an appraisal of your home’s value. If you wish to refinance to get cash out, for example, the value of your home will decide how much you can get. If you want to lower your mortgage payment, the value will be determined by whether or not you have enough home equity.
4. Home Appraisal
You must have an appraisal completed by your lender before refinancing. Your lender will come to your home and estimate the value of your property as part of the appraisal procedure. You may improve your house appraisal by making sure it is in good condition. To make a good first impression, start by cleaning your house and repairing any damage. You must also provide a list of the upgrades you have made to your home.
The underwriting process is successful if the value of your house is equal to or more than the amount of the loan you are refinancing. Following that, your lender will inform you of the details of your closing. If your home’s worth is lower, however, you can choose to cut your loan amount or cancel your application.
You can close your loan once the preceding steps are completed. A few days before closing, your lender will give you a Closing Disclosure document.
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What are the advantages of refinancing your mortgage?
Mortgage refinancing has a number of advantages:
- To shorten your loan term
- To lower your interest rate
- To cash out your home equity
- To change your loan type
When can I refinance my mortgage? Refinancing your mortgage is contingent on a number of things. You can think about your financial situation (such as your credit score) or even market patterns. You can also use a mortgage refinance calculator tool to figure out your break-even point.
Refinancing your mortgage is a smart method to turn your property into a financial asset. It’s also easy because you can change the terms and amount of your loan whenever you choose. This strategy can help you save money in the long run if you take the necessary measures.