What is refinancing?
Refinancing is the process of replacing your mortgage loan with a new one to reduce monthly payments, lower your interest rates, or use equity for extra cash to make large purchases. Sounds like a win-win situation, right? We think so.
Two types of Refinance
- Rate-and-Term – This option allows you to refinance the remaining balance on your current loan, which means you can take advantage of lower interest rates or a shorter term. A rate-and-term refinance is ideal for anyone looking to pay off their mortgage sooner, build equity faster, or save money overall. Who wouldn’t be interested in doing those things?
- Cash-Out – This option involves taking out a mortgage greater than the remaining balance on your current loan; this allows you to use your equity as a cash advance to put toward home renovations or other expenses. A cash-out refinance is ideal for anyone who has built some equity and is looking to make major home improvements, pay off credit card debt, or make a large purchase.
Should I Refinance my Mortgage?
Many homeowners wonder if a refinance might be a good decision. It’s really a personal choice but, in general, it may be beneficial if you can lower your interest rates and plan to stay in the home long enough to recover the closing costs associated with refinancing – referred to as the break-even point. A refinance may also be helpful for those looking to consolidate debt or change the terms of an existing mortgage.
Mortgage Refinance Options include: