Why Refinance?

Refinancing allows you to get a new mortgage, typically with more favorable terms that will pay off and replace your existing mortgage. Refinancing is usually an easier process compared to purchasing since there are fewer parties involved (no realtors or sellers).

You can also get a Cash Out Refinance Mortgage. With a cash-out refinance, you get cash back after closing. These loans work best when you have a large amount of equity in your home. Equity is the difference between what you owe on your mortgage and what your home is currently worth.

When doing a cash-out loan, you might choose to receive a lump sum of cash back at closing that you can use however you choose. In some situations, you might be required to pay off some items on your credit report if your debt-to-income ratio is high.

Benefits of Refinancing

Lower interest rate
Pay off your mortgage faster
Lower your monthly payment
Save money on interest over time
Consolidate debts
Get cash out for home improvements
Get approved for a different, less expensive loan program
Eliminate mortgage insurance
Convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa
Remove an ex-spouse from the mortgage

Getting a mortgage with a lower interest rate is one of the best reasons to refinance. We recommend that you consider how much you can reduce your interest rate versus the cost of refinancing. With our No Closing Cost mortgage, we’ve seen situations where as little as a 0.50% reduction in the interest rate on larger loan amounts can produce enough savings to justify refinancing.

When interest rates drop, consider refinancing to shorten the term of your mortgage and pay significantly less in interest each month and over the life of the loan

Switching to a fixed-rate mortgage from an adjustable-rate one can make sense depending on the rates and how long you plan to remain in your current home.

Tapping equity or consolidating debt are other reasons to refinance—but beware, doing so can sometimes worsen debt problems. Many homeowners refinance to consolidate their debt. At face value, replacing high-interest debt with a low-interest mortgage is a good idea. Unfortunately, refinancing does not bring automatic financial prudence. Take this step only if you are convinced you can resist the temptation of future consumer debt once the refinancing relieves you from your current debt obligations. It also pays to remember that a savvy homeowner is always looking for ways to reduce debt, build equity, save money, and eliminate their mortgage payment. Taking cash out of your equity when you refinance does not help to achieve any of those goals.

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. When used carefully, it can also be a valuable tool for bringing debt under control. Before you refinance, take a careful look at your financial situation and ask yourself: How long do I plan to continue living in the house? How much money will I save by refinancing?

Some experts say you should only refinance when you can lower your interest rate, shorten your loan term, or both. That advice isn’t always correct. Some homeowners may need short-term relief from a lower monthly payment, even if it means starting over with a new 30-year loan. Refinancing also can help you access the equity in your home or get rid of monthly mortgage insurance premiums.

Even borrowers who have fairly new mortgages might be able to benefit from refinancing. Say you were approved for your mortgage last year. Although you might be only 6-12 months into your loan, the ability to lower your interest rate by one-half to three-quarters of a percentage point can substantially lower your monthly payment and reduce the interest over the life of the loan.

Refinancing to Get a Shorter Loan Term

If you refinance from a 30-year to a 15-year mortgage, your monthly payment will often increase. However, the interest rate on 15-year mortgages is typically lower which will shave years off your mortgage and you will pay less interest over time.

When should I talk to a Loan Officer about Refinancing

Online research and mortgage calculators are all well and good, but they might get your hopes up or underestimate your potential savings. Online articles and mortgage calculations don’t take into account your personal situation, financial goals, your credit score, your type of employment, or your home’s current value. To make this kind of decision, it is best to speak directly with one of our experienced loan originators. We can determine if refinancing makes sense for you.