Top Reasons To Refinance A Mortgage
Which option is best for you? See how we helped home owners achieve their goals by refinancing their home.
- Lower your interest rate
- Debt Consolidation
- Use your home equity
- Build equity faster
Regardless of your reasons for wanting to refinance your existing mortgage, you will need to know the following information to expedite your refinance:
- What is the purpose of your refinance?
- Your current terms of your mortgage loan. You will find the detail information from your “Note” which should have been provided at the time of signing your loan documents prior to closing.
- How long do you plan to stay in the home? It is important to know whether you have a prepayment penalty in your existing loan. You will also find this information within the “Note”.
- How long will you keep the new loan? This is important to know so we may determine whether it’s beneficial for you to pay points to get a lower rate.
- What is your current property value? This is especially important if you are cashing out from your equity. We’ll provide a free estimated value up front to ensure a smoother transaction as this is required by lenders prior to loan approval.
- What is your current credit status? Is your credit less than perfect? Find our how we can help increase your credit score. We provide solutions in a short amount of time to secure your refinance loan.
Lower Your Interest Rate
This is one of the top reasons home owners refinance. Some start out with an ARM then they switch to the stability of a Fixed Rate mortgage at some point. Maybe you have a fixed-rate mortgage now with a higher rate, or maybe you have an adjustable rate mortgage (ARM) where the interest rate varies. If you don't think you'll be moving within the next five years or so, then it’s best to get a low fix rate. On the other hand, if you do see yourself moving within the next few years, an ARM with a low initial rate might be the best way to lower your monthly payments.
For example, our client refinanced her 7.4% adjustable rate to 6.375% 30 year fixed loan. She had $1,751 monthly payment with $252,983 loan amount. Her main goal is to lower her payments and get a stable fixed rate. We were able to change her loan to a 30 year fixed with a 6.375% rate giving her a lower payment of $1,676 per month on $268,664 loan amount. Great savings!
Debt Consolidation
Do you want to cash out some equity to consolidate other debt? Good idea! If you have the equity in your home to make it work, paying off other debt such as credit cards, car loans, student loans, and/or home equity loans with high interest rates means you can save possibly hundreds of dollars a month.
For example, our client wanted to combine his 1st and 2nd loan into one mortgage loan, but he also wants to keep the payment as low as possible. Together, he has $379,662 loan balance with $2,763 monthly payment. His goal is also to pay off his credit cards with $21,201 balance and $422 monthly payments, and take some money out of his equity for an unexpected expense. We were able to consolidate his debt with $482,000 loan amount and give him $67,000 and pay off his credit cards from his equity, plus lower his mortgage payment to $2,835. That’s a savings of $350 per month!
Use Your Home Equity
A Cash Out Refinance allows you to tap into the equity you have built up in your home. Just as we showed on the Debt Consolidation example, maybe you want to pay for home improvements, pay your child's college tuition bill, take your dream vacation, or other unexpected expense. Then you'll want to qualify for a loan for more than the balance remaining on your current mortgage. If your home value is higher than your original loan amount and/or your mortgage interest rate is higher, you may be able to do this without increasing your monthly payment.
Build Equity Faster
Do you want to pay off your mortgage sooner? Consider refinancing with a shorter-term loan, such as a 15-year mortgage. Your payments will be higher than with a longer-term loan, but in exchange, you will pay much less interest and will build up equity more quickly. If you have had your current 30-year mortgage for a number of years and the loan balance is relatively low, you may be able to do this without increasing your monthly payment -- you may even be able to save! For example, let's say years ago you took out a $150,000 30-year mortgage at eight percent. Your payment is about $1,100, exclusive of taxes, insurance and so on. If your balance today is down to $130,000, you might take out a 15-year mortgage at six percent and have an almost identical monthly payment. This is a great option for people whose main goal is not to save money on their monthly payment but rather want to build up equity and pay off their home more quickly.
Disclosure
The above refinance examples are based on financing acquired by clients whose names and other personal information are not revealed to protect their privacy. Each client’s financial profile is unique, thus the programs and rates they had acquired may or may not apply to others. Programs and rates are subject to change without notice.
