Refinancing a home mortgage can be a wise decision for many homeowners. Your situation and needs change over time, so why not your mortgage? Now might be the right time for you to refinance into a lower interest rate mortgage and/or shorter term.
What is Refinancing?
Refinancing is simply getting one loan to pay off another.
What does refinancing cost?
Typically, the closing cost of a refinance is between 1% and 2% of the loan amount.
Can I get cash from a refinance loan?
Possibly. Depending on the type of refinance loan, you can take a percentage of cash out against the equity you have in your home.
How long does it take to go through the refinance process?
A typically refinance usually takes between 2 and 4 weeks.
Are all refinances the same?
No. Your refinancing options will depend on what type of loan you already have as well as what you currently qualify for. For example, FHA Streamlines and VA IRRRLs are specific types of refinances that only apply to FHA and VA loans (although they are not the only refinance options for those types).
Lowering Your Monthly Payment
- There are a few ways to lower your monthly payment, including obtaining a lower interest rate or extending the term of your loan. This is usually the primary reason for obtaining a refinance loan. Whether you're looking to switch from a variable rate to a fixed rate loan or looking to pay less per month a refinance loan can help provide more stability and smaller payments.
Shortening Your Loan Term
- Refinancing from a 30-year loan term to a 20-, 15-, or 10-year term will save tens of thousands of dollars in interest.
Cashing-out Equity
- Many people would like to take advantage of the equity they have built up in their homes. When refinancing, it is possible to accomplish that while still reducing your monthly payments. Accessing the equity in your home is a great way to make some improvements in your life whether that be paying for college, renovating or remodeling your home or even starting a business. For most people their homes are their greatest sources of wealth, so using that to its full advantage can make a big difference.
Consolidating Debt
- Refinancing can be useful in keeping your debt manageable by replacing a number of high-interest loans (such as credit card debt) with a single, lower-interest loan. You can take the cash that you gain from tapping into the equity in your house and paying off other debt. Most people will try to pay off high-interest, non-deductible forms of debt such as credit cards or auto loans.
Dropping Private Mortgage Insurance
- Depending on how much equity you have in your home you can refinance your home loan and possibly drop your private mortgage insurance. This can mean a lower overall monthly payment.
