The real estate business can go from simple to complex for one homeowner in just a matter of years. It all starts with a decision to buy a home, then it goes to the mortgage process, and it ultimately lands either in owning the home, or in refinancing. If you are one of the people who ended up deciding to go for a refinancing, this post is for you, especially when you are wondering what happens to your home equity during the refinancing process. As you may have realized, one of the major questions some homeowners end up asking is, "When you start to refinance the mortgage, can the equity be saved, or do you lose it during the process?".
Here's a brief answer to that: The equity that you have gained over time remains yours even when you undergo refinancing. To lenders, it all just boils down to the home's appraisal. Let us say the home gets an appraisal of $200,000, and your remaining mortgage debt is $100,000, then getting a $100,000 refinancing does not change the fact that you own a home that is worth $200,000.
The only slippage in the equity is if you finance your closing costs. Let's say that your closing cost in the refinancing process is $6,000 and you have decided not to pull out cash from your own pocket. What happens next would be that the lender will let you borrow $106,000, and you have decreased your equity position in the home by $6,000.
As a whole, it is important for borrowers to understand that full equity gain in the home will not happen until the property gets sold. Furthermore, your equity will vary over time basing on the home prices within your area, alongside your loan balance.
Speak with your realtor to understand your real estate situation better and to know which refinancing program and mortgage provider is best for you.
