Refinance Your Home: Understanding Your Options
“Refinancing” your home mortgage means that you take out a loan on your home and use it to pay off an existing mortgage. Essentially, you are replacing your home’s old financing with new financing.
Why Refinance?
Homeowners typically choose to refinance when they can do so under better terms, thereby lowering their interest rate, monthly payment, or the payback period. For instance, if interest rates have gone down significantly since you obtained your original mortgage or if your credit has improved, refinancing might save you thousands of dollars over the term of your mortgage. That said, there are fees associated with refinancing, so it’s not always worth doing.
Benefits of Refinancing
Here are some of the reasons why refinancing might be a good option:
- Get a Lower Interest Rate
It’s always wise to keep an eye on interest rates to see if they’ve dropped since you purchased your home. If so, refinancing might make sense. Reducing your interest rate even by just a percentage point can make a huge difference in how much you end up paying. - Reduce Your Monthly Payment
One immediate benefit of refinancing with a lower interest rate could be to lower your monthly payment. Even if interest rates haven’t dropped, you still may want to refinance to reduce your monthly payment by extending the duration of your loan. - Change the Length of Your Mortgage
Some homeowners choose to refinance in order to shorten or lengthen the time it takes them to pay back the loan. Shortening the payback period will cost the homeowner less money in total, whereas lengthening it can improve the borrower’s cash flow by lowering monthly payments. - Cash Out Part of Your Home’s Equity
Refinancing is a great way to free up equity that’s tied up in what is many people’s largest asset – their home. These “cash out” options provide instant, tax-free cash that can be used for any purpose you’d like, such as to pay off more expensive debt, renovate your home, pay medical expenses, start a business, or for a down payment on a second home or investment property. - Convert an ARM to a Fixed-Rate Mortgage
If you currently have an Adjustable-Rate Mortgage (ARM), you may wish to refinance to a fixed-rate mortgage either to lock in a low interest rate or to make planning easier by always knowing what monthly payment will be required in the future.
Who Should Refinance?
Anyone with a mortgage should consider refinancing. Changes in your income, career, goals, or in the housing market might suggest opportunities that you can take advantage of. There are fees associated with refinancing, so it’s not right for everyone, such as those who expect to sell their home in 2-5 years.
Use our Online Mortgage Calculator to see how much your monthly payments would be at today’s interest rates. Whether you’d like to reduce your monthly payments, shorten the length of your loan, or cash out part of your equity, our calculator can help you decide if refinancing fits with your goals.
Are You Ready to Apply to Refinance Your Mortgage?
It’s easy! You can apply online now through our Way Better Mortgage ApplicationTM or contact us to speak with one of our refinance specialists.
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