When Refinancing Makes Sense
There are a huge number of reasons why you might want to look into refinancing options that are available to you. We have access to many different programs and we will help you determine if refinancing is the right option for you and your financial situation. There are several things to consider when weighing your options.
1. Making Your Payments Lower
Is achieving lower monthly payments and improving your interest rate the main reason for refinancing? In that case, applying for a low, fixed-rate loan may be a wise choice for you. This is especially true if you currently have an ARM (Adjustable Rate Mortgage) that interest rates are steadily rising on. It also makes sense to refinance your rate if rates are currently lower than your original one, if you paid off debt, or if your credit score improved. All of these could impact your new interest rate.
2. Getting Out Some Cash
Are you refinancing mainly to “cash out” some home equity? It could be you need to update your kitchen, take care of your college kid’s tuition, or go on a special family vacation. With this in mind, you will need to apply for a loan higher than the balance remaining of your present mortgage loan. With this goal, you want to make sure that taking out the cash is the best financial decision for you. If you’ve had your current mortgage for quite a while and/or have a mortgage loan with a high interest rate, you may be able to do this without making your monthly payment larger.
3. Consolidating Your Debt
Do you have other debt, perhaps with a high interest rate, that you want to consolidate? If you have some higher interest debts (like credit cards or car loans), you may be able to take care of that debt with a loan that has a lower rate through your refinance, if you have the right amount of equity.
4. Building up Equity More Quickly
Do you want to build up equity quicker, and pay off your mortgage sooner? You should consider refinancing to a short-term loan, like a fifteen-year mortgage. The payments will probably be higher than they were with a longer term loan, but the pay-off is immense. You will pay considerably less interest and will build up equity much quicker. However, if you have had your existing thirty-year loan for a number of years and the loan balance is rather low, you may be able to do this without increasing your mortgage payment — you may even be able to save!
5. Remove Mortgage Insurance.
Unless you put twenty percent down on your current mortgage, there is a good chance that you are paying mortgage insurance. Once you have paid down your loan amount or if home values have gone up, you might be able to get this removed from your monthly payment by refinancing.