Ready to Refinance?
Setting goals is the first step in the refinancing process. Refinancing a mortgage is most frequently done to lower payments, shorten loan terms, or obtain cash out.
Reduce Your Payment
If interest rates are lower than when you bought your home, you may be able to reduce your mortgage payment! To learn more about today's rates, contact one of our team members.
A lower mortgage payment means more money for other things in your budget. You can reduce your payment by refinancing in a few ways.
First, you might be able to refinance at a lower interest rate. If interest rates are lower now than when you purchased your home, it's worth speaking with a mortgage professional to see what your interest rate could be. A lower interest rate means a lower interest portion of your monthly payment – and significant interest savings in the long run.
Second, you could refinance to avoid paying mortgage insurance, which is a monthly fee you pay to protect your lender if you default on the loan. Mortgage insurance is typically required only when the down payment is less than 20%. You could save hundreds per month by refinancing to eliminate monthly mortgage insurance payments.
Third, you can reduce your payment by extending the term of your mortgage. Lengthening your term spreads your payments over a longer period, making each payment smaller.
There may be other ways to get a lower payment, so check with us to see what we can do to help you get a payment that fits your current budget.
Take Cash Out
Make the most of your home's equity by refinancing for cash. A cash-out refinance allows you to consolidate debt, reinvest cash in your home, and even improve your credit score!
Refinancing your mortgage is an excellent way to use your home's equity. A cash-out refinance allows you to refinance for a larger loan amount than you owe and pocket the difference. You will not be taxed on any proceeds you receive.
Many homeowners use the equity in their home to pay off high-interest credit card and student loan debt. You can also withdraw cash to finance home improvements, education, or whatever else you require. Because mortgage interest rates are typically lower than other debt interest rates, a cash-out refinance can be an excellent way to consolidate or pay off debt. Furthermore, mortgage interest is tax deductible, whereas interest on other debts is not.
If you've been paying on your loan for a long enough period of time, you may be able to withdraw cash from your home. Furthermore, if the value of your home has increased, you may be able to do a cash-out refinance; a higher value on your home means your lender can give you more money to finance it.
Reduce the Length of Your Mortgage
Reduce the length of your term and pay less interest over the life of your loan!
Shortening the term of your mortgage is a great way to save money on interest. Shortening your term often results in a lower interest rate. In the long run, a lower interest rate and fewer years of payments result in significant interest savings.
So, how exactly does this work? Let's take a look at an example. Assume you have a loan of $200,000 in total. If you took out a 30-year loan at 3.5 percent interest, you would pay about $123,000 in interest over the life of the loan. If you cut your term in half, you would pay approximately $57,000 in interest over the life of the loan. That's a $66,000 difference – and that doesn't even take into account the fact that the shorter term would provide you with a lower interest rate.
It is important to understand that shortening your term may result in an increase in your monthly mortgage payment. However, less of your payment will be applied to interest and more will be applied to the principal balance of your loan. This enables you to accumulate equity and pay off your mortgage faster.