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Debt Relief – Insolvency – Bankruptcy Information » Mortgage Refinancing » When refinancing, are you refinancing the balance of current mortgage or the value of the home?

When refinancing, are you refinancing the balance of current mortgage or the value of the home?

I’m considering refinancing but am a little confused about the process. I cant figure out if I would be refinancing my balance or if the new loan would be for the value of the home? EX: my current loan was for $89,900 but i owe $79, 500.The value of my home was appraised for $92,000 but is now worth $140,000. So what would the new loan amount be for?


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7 Responses to "When refinancing, are you refinancing the balance of current mortgage or the value of the home?"

  1. Ryan M says:
    You refinance the remaining amount of the mortgage. Your new loan will be for $79,500. The fact that you have so much equity in your home means that you will probably get a great rate AND avoid PMI.
  2. LIGirl says:
    If you are only refinancing, it would be the current balance of the mortgage. However, many people will refinance for more than is owed so they can use the money for other things like paying off bills or to perform work on the house. In that case, the loan would be for more than the balance but less than the value of the home.
  3. $so fresh so clean$ says:
    balance of the existing mortgage
  4. Joe S says:
    Refinancing can work a number of ways. To understand, don’t focus on the old loan. Think about what the new lender is willing to loan you. Of course, in order to establish a first lien position, all other liens must either be removed or be approved by the new lender. Practically speaking, this means paying off the existing mortgage. Typically, prospective lenders will handle the process so that there is a smooth transition from the old lender to the new.

    Now, how much will the new mortgage be? Well, that’s up to you. In your example, you could request a loan for $79,500. There are probably closing costs, so you would have to bring some money to closing. Or you could request a larger loan, say $84,500 (assuming costs of $5,000). In this case, you would have to bring no money to closing.

    Or given the appraisal of $140,000, you could borrow up to $112,000. You would pay off the old mortgage, pay closing costs and pocket the rest. On the other end of the spectrum, you could borrow less if you had other sources. For instance, you could borrow only $50,000 and bring $29,500 plus costs to the closing.

    The real limit is placed by the lender and by your own discretion. Now that I’ve probably been overly complex, most people just refinance their existing balance. There is a variety of practice regarding closing costs. I refinanced a few months ago and brought some extra cash to closing so that I would continue with the same loan balance. But some people would roll the closing costs into the new loan.

  5. JD Bell says:
    Unless you want cash at closing (essentially borrowing more money against the higher appraised value), the loan amount will be the same as the loan you are paying off.
    I just closed on my refinance.  Went from a 30 year fixed to a 15 year fixed.  I’m now paying roughly $190 more each month, but will pay of my mortgage in half the time.  I’m saving over $200,000 in interest cost!
    Just be sure to do your homework on rates and programs, especially if you have special circumstances such as poor credit or income challenges.
  6. Chandra157 says:
    There is absolutely no way that you can refi for $79,500. Just like others have stated, you will have to pay closing costs in one way or another. I urge you to stay as far away from a broker as possible. They will charge you up to 20% of the loan amount (standard is 8%) and keep in mind that a bank will offer no closing costs but will charge you a higher interest rate. Now is a good time for rates, but many lenders are unstable due to the crisis with the economy so make sure you refinance with someone who won’t sell your loan.
  7. Shep says:
    Hi, When you refinance your home, you are refinancing the current balance of your existing mortgage. In your example, you would be getting a new loan for $79,500 plus any closing and settlement costs. So in your situation, your loan will probably be for something like $82,000. Now if you wish to take out additional cash for other reasons you can. For a more detailed explanation, check out the link below. You will find all the refinance information you need there.

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