What is a home refinance? The textbook definition of refinance is “The replacement of an existing debt obligation with another debt obligation under different terms.” In this case, you are paying off your existing mortgage loan with a new mortgage loan that has different terms than the loan being paid off. Once you’ve been through the mortgage process, it’s a bit easier to engage the goals you may have. That said, understanding the various refinancing mortgage options and weighing all refinancing options at your disposal can still be a heavy task. We can help!!!
First off, why would you consider refinancing your home? There are typically 3 reasons a home refinance might be beneficial.
- Payment reduction– This is always a primary reason to refinance your mortgage loan. You’d like to pay less than you’ve been paying each month for your housing payment.
- Home Equity!!– Having equity in your home is simply the state of your home being worth more than you owe. The amount of equity you have is based on the value of your home (determined by an appraisal) and how much you owe on the current mortgage loan. The factors that can impact the increase of the value on your home are the housing market, specific to your neighborhood, and what other similar homes near you have been selling for. Debt consolidation and home improvements are very typical reasons to utilize the equity in your home, but what you may choose to do with the equity you have is up to you!
- To Get a Shorter Loan Term -If you would like to shorten the amount of time it may take to pay off your loan, you can choose to do a 15 year or even 10 year loan, as opposed to a 30 year loan. Shorter terms have the advantage of decreasing the amount of mortgage interest you pay over the life of the loan. The trade off is that in most cases, the monthly payment will be higher.
It’s important to note that each of these factors can be considered separately OR together when looking at the best case scenario for your needs. There are many legitimate reasons to refinance your home. It is possible to save on your monthly payments, use equity for home improvement and shorten the term of your loan with one singular refinance transaction. Evaluating these possibilities is where we come into play.
Home Mortgage Refinancing Options:
- FHA Streamlined Refinance – If you currently have an FHA loan and rates have gone down, we can provide you with FHA loan refinance options with limited information needed before approval for closing. This is not always the case, but a good option to explore.
- VA IRRRL- “IRRRL” stand for Interest Rate Reduction Refinance Loan. Similar to an FHA Streamlines Refinance, the documentation required is limited and this is typically a good option for those veterans seeking to reduce their monthly payment.
- Conventional Refinance – Did you put down less than 20% when you bought your home? With conventional refinancing this typically means you have mortgage insurance OR a second mortgage that may be at a higher interest rate. If you have equity, you may be able to remove the mortgage insurance from your monthly payment, or combine the current 1st and 2nd mortgage loans you have, into one new conventional mortgage refinance loan with a lower monthly payment.
- Cash out Refinance – This means you’d like to take some of the equity in your home to pay off other debt, do home improvements or buy a car. Conventional, VA and FHA loans all offer the possibility to take some of the equity you have and use it as you see fit.
We would truly cherish the chance to explore home refinancing options with you. Please use our contact form to reach one of our friendly home mortgage financing professionals.