Guide to Home Refinance
The 3 most common reasons to refinance your mortgage is to Take Cash Out, Lower Your Monthly Payment, and Lower the Term of Your Mortgage.
Cash Out Refinance
With a cash out refinance, you replace your existing mortgage with a new home loan for more than you owe on the house. The difference between the two loan amounts is given to you in cash.
A cash out refinance is possible if you have been paying on the loan long enough to build equity. Another way to be eligible for a cash out refinance is if your property value has increased since you purchased the home.
If you have questions or want to see if you qualify you can speak to one of our loan agents at (866) 708-5626.
An added bonus for borrowers who choose to take cash out of their property to pay off debt is mortgage interest can be tax-deductible, but interest on other debts usually is not. Many homeowners use cash from their home to pay off high-interest credit card and student loan debt. Since mortgage interest rates are typically lower than interest rates on other debts, a cash out refinance is a great way to consolidate or pay off debt. Others use a cash out refinance to help pay for home improvements.
Lower Your Monthly Payment
There are a few ways you can lower your mortgage payment by refinancing.
First, you may be able to refinance at a lower interest rate. If interest rates are generally lower than they were when you bought your home, it's worth speaking with a loan agent to see what your interest rate could be now. Getting a lower rate means lowering the interest portion of your monthly payment. This type of loan is called a rate and term refinance.
See interest rates for our different loan products here.
Second, you could refinance to get rid of mortgage insurance. Mortgage insurance is a monthly fee you pay to protect your lender in the event you default on the loan. Mortgage insurance is usually required when you have less than 20% equity in your home. You could save money by refinancing to stop paying monthly mortgage insurance.
Third, you can get a lower payment by changing your mortgage term from say a 15 year mortgage to a 30 year mortgage. Lengthening your term stretches out your payments over more years, which makes each payment smaller.
Shorten Your Mortgage Term
Shortening your mortgage term is another way to save money on interest. Shortening your term means reducing the contract time of your loan. When borrowers do this they typically receive a lower interest rate. A lower interest rate and fewer years of payments means you pay less to your lender in the long run. A shorter term means less of your payment will go toward interest, and more will go toward paying down your principle balance. This allows you to build equity and pay off your loan faster. In most cases shortening your mortgage term increases your monthly mortgage payment, so make sure you know how much you will owe each month with a new mortgage.