Are you thinking of refinancing your mortgage? If so, there are a few things you should know beforehand to ensure you’re making the best decision for yourself and your finances. CNBC proclaimed that eight million homeowners were leaving cash on the table by not refinancing. With that said, could you be saving money by refinancing?
Even if you didn’t have plans to refinance your mortgage, you may have started wondering whether to do so to save some money. If you’re still wondering, we’ll walk you through a few things you should know.
What is refinancing?
A refinance loan is a type of mortgage loan. It replaces the original mortgage that you took on to pay for your house. The refinance loan helps to pay off the original loan but with revised terms and rates. Often, homeowners save money in some capacity by refinancing.
When refinancing makes sense
The goal of refinancing a mortgage loan is typically to save money in some way, either on your monthly payments or on the overall cost of the loan. There are a few situations where homeowners should consider refinancing:
- The interest rates fall below what you’re currently paying
- Your credit improves
- You’ve built enough equity to remove your mortgage insurance
How to refinance
If you’ve run the numbers and have determined that refinancing your mortgage makes financial sense, then it’s time to start the process. To begin, decide which of the following is your goal for refinancing:
- To pay less interest over the life of the loan – For this, you will probably want to lower your interest rates without lengthening your current payout schedule.
- To lower monthly payments – For this, you may opt for lower interest rates but get a longer payoff schedule, for example, entering into a new 30-year loan.
- To tap into equity – You will want a “cash-out” refinances for this.
- To remove the need for mortgage insurance – You should have at least 20 percent equity in your property for this.
- To reduce the length of the loan – For this, you will want to refinance into a loan with a shorter time horizon than your current payoff schedule.
- To get into a more stable loan – This means you will want to refinance into a fixed-rate loan.
Once you have perfected your credit profile and ran the numbers, then you can proceed with refinancing your mortgage. It’s time to get in touch with lenders who can help. It’s best to compare offers from three to five lenders to ensure you are getting the right deal.
Make sure you enlist the help of Andraya Coulter to find the best home loan to fit your needs and your budget. I assist California and Texas with all their home loan needs. Contact me to get started today!