First of all, what does it mean to refinance?
The process of refinancing has the goal of replacing a homeowners existing mortgage with a new one! The new mortgage typically has more favorable terms for the homeowner to live life more comfortably. This could mean securing a lower interest rate, reducing your monthly payments, or shortening the loan term.
A process called “cash-out refinancing” allows homeowners to tap into the equity they’ve built in their home and use that money for other possible areas of life. Homeowners may typically use this money for higher education, remodeling, and paying off other loans. There are many different reasons why a refinance could be for you. Refinancing is a valuable tool used by many homeowners. Let’s find out if it’s a good time for you!
Lower interest rate? When and why.
First off, when and why should you lower your interest rate? Refinancing your mortgage makes sense for several reasons; one of which is lowering interest rates. But why is it so important? The main reason is it allows you to save money every month and who doesn’t want that? The key is WHEN you do it. You can’t refinance at any time or else you could lose money instead of saving it.
The first thing you need to do is look at market rates as the ideal time to refinance is when market rates have fallen below the rate on your current loan. Second, if you want to refinance, calculate the break even point of your loan so you’ll know exactly how long it will take to reap the benefits. A good source to learn more about when and how to figure out the timing on When Should You Refinance?
Reducing your monthly payments
Mortgages are expensive, budget constricting, and just flat out stressful. Figuring out how to lower your monthly mortgage payment can help you keep your housing expenses and budget affordable yet sustainable. Here are a few strategies to combat your high mortgage payment.
First and foremost, refinancing is the most effective and easiest way to lower your monthly payment. Second, lengthening your loan term, it spreads your payments out more and reduces your monthly payment. Lastly, shop for cheaper homeowners insurance, if you can find a cheaper rate out there, it is an easy way to save you money without refinancing or stretching out your mortgage. If you want to see more strategies to lower your monthly payments check out How to Lower Your Monthly Mortgage Payment.
Shortening your Loans
No one wants to be stuck on a 30 year loan. Less time = less interest. If the principal is paid in a higher amount at the start, as well as an increase in the monthly payment, the time that is associated with the loan goes down. But why does that matter? Think of it this way. The longer someone pays on a loan, the more interest they are putting down on that loan. When the loan is shortened, less interest is paid overtime ultimately saving you money. Because who doesn’t want to save money? Not sure which loan to pick or have more questions? The Purchase Rates and Types of Loans pages can give you more information on what loan types work best for you.
Cash Out Refinancing
First of all, what is cash-out refinancing? Cash-out refinancing is a type of mortgage loan. This specific mortgage loan allows you to replace your existing mortgage loan with a larger mortgage, and then you, the homeowner, can keep the difference and take advantage of your home’s equity!
First, let’s see if you qualify for cash-out refinancing. To qualify for cash-out refinancing, you first have to have equity in your home. What does it mean to have equity in your home? To have equity in your home, your home’s value must be greater than the current mortgage balance.
Now let’s decide if refinancing your mortgage is for you! If saving money in the long run, reducing your monthly payments, or obtaining lower interest rates sounds like something you’d be interested in, then refinancing may be for you! To get a better understanding of your mortgage loan type; 30 year loan or 15 year loan, refinancing can look different. If you want to learn more about which direction may be best for you our 30 years vs 15 years Mortgage Loans page can give you more information.
In Conclusion:
Cash out refinancing is a great way to save money on home investments and steer away from longer loan periods that may rack up interest over time. Buying a home can be a scary decision, but our website has many great resources and tools that you need to help you on your way to make that purchase count. Still have questions or are looking for a customized rate? Contact us! You can receive free rate calculations and pre-approvals that are tailored to your needs and lifestyles.