- Refinancing means replacing an existing loan with a new loan.
- The new loan should have better terms than the loan it replaces.
- Consumers commonly refinance mortgage loans, car loans, and student loans.
Mortgage refinancing is still popular.
While mortgage rates are creeping up from historic lows, according to the Mortgage Bankers Association, refinance mortgages still account for a larger portion of the mortgage market.
Several refinance programs include conforming loans, VA loan refinance, FHA refinance, FHA streamline, and jumbo loan refinance.
Should You Refinance?
Can you save money with a lower interest rate and cut the time it takes to pay back your mortgage? Or do you want to lower your monthly payments?
There are many reasons to refinance. The most common reasons are to lower your interest rate, lower your monthly payment, switch to a more stable payment schedule, or take out more money.
When considering a mortgage refinance, consider the amount of time you plan on staying in your home, the difference in interest rates, the affordability of your monthly payment, and the number of closing costs, including lender fees and third-party fees. Refinancing can be beneficial, but make sure you do it for the right reasons.
Top Refinance Considerations
- Compare interest Rates and Fees
- Get affordable monthly payments
- Check your credit score
- Choose the best loan period
Mortgage Refinance Highlights
Get your credit in order before applying for a mortgage refinance. A good credit score helps you get the best rates. Also, check to see the value of your home, which will affect your loan to value ratio and the need for mortgage insurance. Lastly, shop around to find the best mortgage refinance rates.
Lower Your Payments
If you are struggling with your mortgage payment or bills, or need to free up money for other expenses, consider refinancing your mortgage. Even if your home's value hasn't increased, you can still do a mortgage refinance. The advantage of taking a long-term loan is reducing your monthly payment. With today's low-interest rates, you can possibly lower your interest, lower your payment and save money. However, remember that the longer period could mean paying more interest over the life of the loan.
Do you want to consolidate debt? Or, maybe make some home improvements? If you have equity in your home, consider taking out a cash-out refinance. You can benefit by saving money on your current mortgage and improving your overall financial position. If you recently refinanced and have an excellent interest rate, then perhaps a home equity loan (HEL) or home equity line of credit (HELOC) will allow you to keep your current mortgage but still tap into your equity. Avoid taking out loans for frivolous reasons.
One of the most popular reasons to refinance is to save money. Some borrowers are only interested in lowering their monthly payments, whereas many want to refinance to save money over the life of the loan. By lowering your interest rate, you can immediately save money. By shortening the term of your loan, you can increase those savings. If you have more income or less expenses you can consider putting more money into your monthly mortgage payment. Don’t forget to shop around and check upfront costs.
An adjustable-rate mortgage (ARM) starts with a low interest rate. The downside is that over time it can increase, subject to limits set each year and over the life of the loan. The increase in interest rate will cause an increase in monthly payments. So, it is crucial to make sure that you can afford a new monthly payment. If you are confident that you will be selling the home or paying off the loan in the short term, look into a five-year or seven-year ARM. An adjustable rate mortgage is complicated, so make sure that your lender explains all of the details.
Check out Bills.com Refinance Calculator
Check out Bills.com Refinance Calculator and discover what a change in rate can mean to your monthly payment and how much you can save over the life of the loan.