Before you decide to refinance your home loan, it’s important that you understand how it works. The process can seem confusing or overwhelming, but it doesn’t have to be.
What is Refinancing?
Refinancing is the process of replacing your existing mortgage with a brand-new loan. In short, it presents an opportunity to improve your current mortgage. It involves getting a new loan with new terms and using that money to pay off your old loan.
Reasons to Refinance
There are numerous reasons you may choose to refinance. You can get a lower interest rate that could result in lower mortgage payments, leaving you with extra money each month to save or spend on other things. If you refinance to a shorter loan term, you may see slightly higher monthly payments, but you’ll build equity faster and pay off your mortgage in less time. When it comes to cash-out refinances, you can turn your equity into cash that you are free to access and spend without tax penalty.
Is Refinancing Right for You?
Whether refinancing is right for you depends on lots of different factors. It’s important to consider your financial goals. Do your goals include lowering your monthly bills or shortening your loan term? Also, you should also look at your credit score. If your credit score falls within the exceptional or very good range (800+ or 740-700, respectively), you’re in a better position to refinance with a lower interest rate. How long you plan to stay in your home matters, too. Because of closing costs, it can take months or even years to break even and truly see savings. If you are planning to move or sell soon, this may not be the best option. However, if you plan to stay in your home, it could save you money in the long run. If you’re thinking about making home improvements such as finishing a basement, remodeling a kitchen, or installing a new roof, cash-out refinancing may be the right move for you so you can put that money towards increasing the value of your home.
If you think it may be time to refinance your mortgage, contact one of our experienced and knowledgeable Loan Officers today to learn more and explore your options!
