Refinance

Are you looking to reduce your monthly mortgage payments, get a lower interest rate, convert your home equity into cash, or switch to a fixed-rate loan? Consider refinancing your home loan.

Refinancing is the process of replacing an existing mortgage with a new loan. Typically, people refinance their mortgage in order to reduce their monthly payments, lower their interest rate, or change their loan program from an adjustable-rate mortgage to a fixed-rate mortgage. Additionally, some people need access to cash in order to fund home renovation projects or paying off various debts and will leverage the equity in their house to obtain a cash-out refinance.

Generally, refinancing is a good option if the new interest rate is lower than the interest rate on your current mortgage, and the total savings amount outweighs the cost to refinance. For example, if you have $390,000 remaining on a $400,000 loan at 4.25%, replacing your existing mortgage at 3.75% can earn savings of $162 per month compared to your previous loan.

A cash-out refinance replaces an existing mortgage with a new loan with a higher balance, sometimes with more favorable terms than the current loan. The difference between these two loans is distributed to the homeowner as cash.

Common uses of a cash-out refi include paying off credit card debt, financing a business, covering college tuition, managing unexpected expenses, and making improvements to one’s home.

The three most popular cash-out refinance options are:

• Conventional Cash-Out – Cash-out refinancing options are available to qualified homeowners with more than 20% equity in their homes.
• FHA Cash-Out – This cash-out refinancing option is available to homeowners with more than 20% equity in their homes.
• VA Cash-Out – If you are a US veteran or an active service member, choosing a VA Cash-Out Refinance often allows you to use even more equity from your loan.

The best way to evaluate this decision is to consider the refinance on its own merits. Does it make sense to refinance your home, based on lower interest rates or shorter repayment terms? If this is the case, then it may be a good financial move. If you would like to start the refinance mortgage process, or have questions, please contact Right Key Mortgage^℠ to schedule a free consultation.