Refinancing a Home Loan

When you decide to refinance your home, you’re basically paying off an existing mortgage by taking out a new loan. By doing this, you may get a lower interest rate, reduce your loan payment term or get cash at closing by borrowing against the equity in your home. For more information, feel free to contact us.

Benefits of Refinancing a Home Loan

Like most homeowners, you’ve probably heard compelling reasons for refinancing your home loan:

• Keep your payments stable with a fixed-rate loan
• Lower your interest rate
• Get cash out from your home’s equity
• Consolidate debt

But how do you know if it’s the right time for you to refinance?

Take a look at our refinance calculator, to help you compare your mortgage home loan to current loan options and interest rates, and decide if refinancing is the smart move.

Refinancing your mortgage could let you lower your monthly payment, reduce your interest expense or get a loan with a fixed interest rate and payment. If you’ve been waiting to take advantage of those opportunities because you feel uncertain about the process to refinance, here are three simple steps that can help you navigate the refinance process:

1. Figure out your goals.
Do you want to refinance to lower your monthly mortgage payment, save money on interest costs, switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage or achieve a combination of those goals? Focusing on your reasons for refinancing will help you choose a loan that will enable you to accomplish your objectives.

2. Compare.
You probably already know how much your monthly mortgage payment is. But do you also know your current interest rate and the terms of your loan, and if your rate is adjustable? That information can help you choose which loan you want. We can help you compare loan options based on current interest rates to your existing loan.

It's also a good idea to check the current value of your home. Equity is a major factor in whether you’ll be able to refinance. Contact us today and we’ll assist you in this process.

3. Choose your loan.
Once you choose a loan, it typically takes several weeks to close your loan. During that time, you will need to complete a formal loan application, if you haven’t already done so, allow an appraiser into your home, and possibly obtain a cashier's check to pay your closing costs. 

Your mortgage may have a 30-year term, but not many homeowners stay with the same loan for that long. In fact, the average American refinances his or her mortgage every four years, according to the Mortgage Bankers Association. That’s because paying off your present mortgage and taking out a new one can mean big savings over several years. However, mortgage refinancing comes with a price in the short term, so it’s important to consider both the costs and benefits before making your decision.

Is Refinancing Right for You?

If you’re refinancing in order to pay less interest, you won’t usually see the savings right away. That’s because lenders typically charge fees when you take out a new mortgage, and you may also have to pay a penalty for getting out of your old one. To determine whether refinancing makes financial sense for you, consider these issues:

• How long you plan to be in your home. If you expect to move in a year or two, you may never realize the potential savings you’d get from refinancing. As a rule of thumb, the longer you plan to stay in your current home, the more sense it makes to refinance.
• The prepayment penalty on your current mortgage. Many mortgages carry a penalty if you pay them off early. The amount varies, but it is usually a small percentage of the outstanding balance, or several months’ worth of interest payments.
• The costs of the new mortgage. When you take out a new loan, your lender may charge a number of fees including application, appraisal, origination and insurance fees, plus title search, insurance and legal costs that can add up to thousands of dollars. Lenders may also charge discount points, which are paid upfront to secure a lower interest rate. As a guideline, expect fees to eat up any potential savings unless your new interest rate is at least a half a percentage point lower than your current one.
• The true difference in borrowing costs. When you’re considering refinancing, remember that the posted interest rate doesn’t reflect the entire cost of the mortgage. The amount you pay over the life of the loan will also be affected by the length of the term, whether your rate is adjustable or fixed, whether you paid discount points, and what upfront and ongoing fees you incur. One way to compare mortgage costs is to look at the annual percentage rate (APR), which takes into account not only the base interest rate, but also points and other charges. All lenders must follow the same rules when calculating the APR, so it’s a good basis for comparison.
• Your reduced tax savings. Consult a tax advisor who can help you understand the tax implications of refinancing.

CLICK HERE to find a qualified Mortgage Consultant to determine if refinancing is advantageous for you.