Refinance
Refinancing your existing mortgage could save you hundreds or even thousands of dollars each month. Have you checked your existing home loan terms lately? It is very possible that rates may have dropped since you last financed your home. If this is the case, you may want to consider refinancing.
Possible Benefits to Refinancing
Lowering your monthly payments and interest rate
The main advantage and/or most common of advantage of refinancing is reducing the loan's interest rate. Obtaining a lower interest rate can have a significant effect on monthly mortgage payments, potentially saving hundreds or even thousands each year.
Converting an adjustable rate loan to a fixed rate loan
Going from ARM (adjustable rate mortgage) to a Fixed Rate
The general rule of thumb is that refinancing to a fixed-rate loan makes the most sense when interest rates are low and one can lower the monthly payment and/or interest rate.
Potential benefits of a fixed-rate loan
The main benefit is stability. While an adjustable rate loan’s monthly payments can fluctuate, the monthly payment on a fixed-rate loan will stay the same throughout the life of the loan.
Other reasons a fixed rate mortgage refinance is a good choice if you:
- Think interest rates could rise in the near future and want to keep the new low rate for the life of the loan
- Plan to stay in your home for many years and don’t see a move on the horizon
- Prefer the simple stability of a fixed payment to a payment that can change periodically
Extracting cash from your homes equity (cash out)
Cash-out refinance
This pays off your existing first mortgage and lets you take out some of your home equity in a lump-sum cash payment at closing. This results in a new mortgage loan which may have different terms than your original loan (meaning you may have a different type of loan, a different rate as well as a longer or shorter term/time period for paying off the new loan).
How do you get your money from a cash-out refinance
You receive a lump sum when you close your refinance. The loan proceeds are first used to pay off your existing mortgage(s), and closing costs and any remaining funds are yours to use however you wish. You typically then will receive those funds in the form of a check or wire transfer from escrow at closing
*Cashing out could also help you with: home improvements, an education fund, or consolidating debt. For more details on refinancing, give us a call, we are here to help.
Reducing or increasing your loan term (30 year fixed to a 15 year fixed for example)
If you are fortunate enough to be in a position where you can afford to make principal reduction payments, then reducing your mortgage term may make sense for you. It could potentially save you tens or even hundreds of thousands in interest over the life of the loan.
The other side is, if you are in short term fixed now (15 year fixed) and struggling to make your monthly payment then increasing your mortgage term may be what you need. By increasing your mortgage term it can have a significant effect on monthly mortgage payments, potentially saving hundreds or even thousands each year.