Refinancing your mortgage can be an intimidating process without the right foundation and preparation. Most people refinance their mortgage to decrease interest rates, cash out a portion of their home equity, lower monthly payments by extending the mortgage term or increase monthly payments by adjusting the mortgage terms so they can pay off the loan sooner and save money. If you are interested in saving money on interest or borrowing less money, then refinancing your mortgage might be the best option for you.
What Is Mortgage Refinancing?
Mortgage financing is a process that allows homeowners to replace their existing home loan with a new one. It gives homeowners the opportunity to take advantage of lower mortgage rates while they have at least 20% equity in their property. By refinancing your mortgage, you can benefit from a lower interest rate and reduce your debt.
What Are The Benefits Of Refinancing A Mortgage?
A mortgage refinance might lower your interest rate, give you access to equity, or make home renovations possible. Refinancing can help reduce monthly payments or help you pay off your mortgage quicker to become debt free. Mortgage refinancing can help you repay other loans quickly through debt consolidation and saving money on high interest rates.
Explore your refinancing mortgage options to find the one that suits you best. *Note: not all refinance loans will be available from each Lender.*
Types Of Refinance Loans:
1. Rate-And-Term Refinance
The Rate-And-Term option for refinancing can help homeowners who are looking to meet their financial needs by either changing their monthly payments or choosing a new interest rate.
2. Cash-Out Refinance
Cash-Out Refinance lets homeowners refinance their mortgage and take out up to 80% of equity at the same time. When you refinance with cash out, the money taken from your equity is added to the new loan balance.
A cash-out refinancing option generally has a higher rate and monthly payment than other refinancing options, and it depends on your credit standing and how much you plan to take out.
3. Cash-In Refinance
Cash-in refinance is a way for homeowners with less than 20% equity to pay off the principal balance of their current mortgage with no penalties.
If your goal is to pay off private mortgage insurance, or qualify for a lower interest rate then you may want to consider cash-in refinancing.
4. Second Mortgage
A second mortgage is a home equity loan that secures your property as collateral for the loan. You must repay both mortgages, and if you default, the house could be taken to pay for both loans.
5. Home Equity Line Of Credit (HELOC)
A home equity line of credit, or HELOC, uses your home as collateral. It is a revolving line of credit with an interest rate much lower than that for conventional lending.
Interest rates are only charged on the amount you withdraw. You can borrow up to 80% of your home’s value as long as it does not exceed $650,000 and your lender combines your home equity credit limit with the remaining balance of your mortgage.
6. Loans And Lines Of Credit Secured By Your Home
If you have consistently made mortgage payments in full, your lender may allow you to borrow funds from this account for a short period of time.
Estimate The Total Cost Of Refinancing Your Mortgage.
When refinancing your mortgage, you have to pay additional fees and closing costs. To see if it’s worth refinancing, make sure the savings from lower interest rates will outweigh these initial expenses: attorney fee (ranging from 1.5% -2%), home appraisal ($200-300), lender title insurance($550-650), including a penalty if you break the mortgage early (as high as 1%).
Make sure that all of this information is calculated before signing anything!
Ready To Start Saving On Your Mortgage?
Though there are many clear benefits to mortgage refinancing, this financial practice can have some hidden fees and might not be right for everyone. Look at the estimated savings before you refinance as it could increase the overall cost of your home.
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If you are struggling with debt we can help. Whether you’re a first-time homebuyer, refinancing, or looking to tap into the equity of your home, we have loan options available. Your credit rating shouldn’t stop you from getting the loan that’s right for you. We have a variety of loans available for any financial situation. We will work with you to customize a mortgage solution that best suits your goals. Get in touch with us today!