Should You Refinance Your Mortgage?
- Lower Your Monthly Payment – Refinancing your home can result in significant reductions in your monthly payment. Even if your rate does not decrease, by renewing your loan term you could still see your mortgage payment decrease by hundreds of dollars a month.
- Get Rid of Debt – Refinancing can allow you to pay off any existing debts that may have much higher interest rates than your new mortgage. By paying off additional debts through a refinance, you will significantly increase your monthly cash flows by eliminating these other debt payments.
- Improve Your Loan Product – Just because you got a 5% interest rate two years ago doesn’t mean a better rate doesn’t exist today. Lock in a lower interest rate, switch from an Adjustable Rate to a Fixed Rate, or reduce your loan term; there are many ways to improve your current mortgage.
- Save Tens of Thousands in Interest – By lowering your interest rate in a refinance, you could reduce your total interest payments by tens of thousands if not well over a hundred thousand dollars over the life of the loan. This will lead to an overall increase in your long-term net worth.
- Make Home Improvements – Use your home’s equity to get that kitchen or bathroom you’ve always wanted. The interest rate on your mortgage will be much less than any other credit cards or loans you might use to finance these types of large purchases.
- Mortgage Interest is Tax Deductible – The interest you pay on your mortgage is generally a tax write off. You should always consult a licensed tax professional to determine what tax deductions you may be eligible for.
There are several options you have when it comes to financing your home. The first step to becoming a homeowner is to understand the many loan options available to you. Below is a summary of just a few of the many options out there, but to understand all available options, you should take the time to speak to one of our licensed loan specialists who can walk you through all of your options.
Types of Refinance Mortgages:
Rate and Term Refinance:
This type of refinance will change your rate and/or term. Using this refinance usually results in lowering your monthly payments.
Cash Out Refinance:
This type of refinance allows you to tap into the equity of your home to pay off debts, complete home improvements, or for any other legitimate cash need.
Cash In Refinance:
The opposite of a cash out refinance, this type of loan requires you to bring additional funds to closing to lower your loan balance. You might use this if you’re looking a specific lower payment, you need to bring funds in order to pay off your existing mortgage, or you just simply want to save on interest payments over the life of the loan.
Things you should consider when Refinancing your Mortgage
Refinance mortgage transactions are usually much faster than purchase transactions. They also often demand less documentation than purchase loans. If you’re thinking about refinancing your home, here are a few things to think about:
- How will this refinance improve my financial situation? Try using our Mortgage Calculator to determine how much you might save (or increase if taking cash out) on your monthly payment by refinancing.
- How long are you planning to stay in the home? Refinancing into an Adjustable Rate might make a lot of sense if you know you’re planning to move in the next 5-7 years.