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If you’re a condo owner, refinancing might be something you’ve considered a few times. There are plenty of great reasons to refinance and save yourself some money. Here’s everything you condo need to know about refinancing your condo.
While refinancing a condo isn’t that different from refinancing a single family home or other property, the major difference focuses on condo eligibility.
Depending on your condo association and builder, the ability to refinance can vary. Before starting the refinancing process, you want to ensure your condo meets the requirements. Some condo associations may require that you have a certain percentage of equity in your property to refinance. This is essential for the condo association to mitigate risks and issues.
Ron Wysocarski, a condo expert and owner of Wyse Home Realty said, “Not every single condo will require a review to refinance. Conventional loans on detached or site condos typically don’t require a review as they are considered single-family property. If you’re in a condo building with only four units, the same rules apply. “
Suppose you’re using a VA or FHA loan to refinance. In that case, those lenders will need to approve the condo project to proceed with your refinancing. If your particular build isn’t on the approved projects list, you might have difficulty refinancing.
Suppose you’re looking to refinance with your current lender. In that case, you may be subject to a more limited review process because you’ve already been approved for financing once before. It’s essential to reach out to your lender if you have any questions about the refinancing process.
There are several benefits to refinancing your condo.
Refinancing could be your answer to reducing your monthly expenses. While you’re refinancing for a longer term, that means that your smaller mortgage is extended over a longer period of time, making your mortgage payments more manageable. If you’re not looking to pay more money over time and you don’t want to refinance for longer, you can work with your lender to determine a plan that works for your financial goals.
Suppose you get a promotion at work or your side hustle has taken off, and you want to throw as much money onto your mortgage as possible. In that case, you can refinance your loan for a shorter term, increase your payments, and you can save a lot of money in interest over time.
Refinancing to get a better interest rate saves you a lot of money over time. If your credit score has increased, you’ve paid off some debt, or interest rates have dropped, it’s a great idea to refinance to lower your rate.
If you have an FHA loan, you likely are paying a mortgage insurance premium if you paid less than 10% as a down payment. Many FHA mortgage holders refinance after making it to 20% equity to remove that insurance, reducing their payments.
If you need some extra money and want to pay off debt, remodel your home, or just need a large sum of cash to make a purchase, refinancing your home can help with that. Suppose you’ve paid $100,000 of your $200,000 mortgage. You can then refinance for an extra amount of money and take it in cash. Many homeowners do this to repair, renovate, buy a vehicle, or consolidate their debts.
If you’re ready to start the process of refinancing your condo, here are the steps you’ll need to take.
Your first step will be determining whether or not you can go through the entire refinancing process. Many roadblocks homeowners face include:
If your condo doesn’t match any of the above characteristics, you’ll likely be in the clear for refinancing.
If you’ve determined that you’ll likely be approved for a refinance, you can begin the process of applying. Suppose you’re in the market for a new lender. In that case, you will want to check out lenders in your area with great reviews, interest rates, and customer service. Once you’ve determined your lender, you can submit an application for refinancing. Each lender will have a different process. However, you’ll need to provide paystubs, bank statements, tax returns, and W-2s.
Once you’ve applied, your lender will provide you with a loan estimate. A loan estimate provides you with the terms of your new loan, how much you can take, and the new interest rate. It will also include your new closing costs.
Once you’ve agreed to the loan estimate, you can contact your lender and lock in your new rate. After you’ve locked in your rate, you’re protected from the changing rate until your loan closes since it takes up to 60 days for your refinancing to close.
Now that your loan is confirmed, your lender will start the underwriting process to ensure your income is valid and everything is actually approved. Your lender will also schedule an appraisal to confirm what the condo is worth and that they’re not loaning you more than what it’s worth. Once your refinancing is approved, you’ll start the closing process.
Much like closing on your original mortgage application, a refinance has a similar process. You will sign some paperwork, confirm the terms, mortgage payments dates, interest rate, and much more. You’ll pay any applicable closing costs, and then it’s all done. If you’re taking cash from your refinance, you’ll have to wait for a three-day window before you get the money, as you will have that many days to cancel. Once that window closes, the money will be yours.
Refinancing the mortgage on your condo has plenty of benefits, including lowering payments, increasing payments, lowering the interest rate, or taking out cash against your equity. Whatever your reasoning for refinancing, the process can be just as easy and straightforward as your original mortgage.