Refinance Guide

Reasons to Refinance a Mortgage

The first step to deciding whether to refinance or not is to define your objectives. The most frequent motives for refinancing mortgages are to cash out, get a lower monthly payment, or to shorten the mortgage term.

Take Cash Out

Refinancing your mortgage can be a fantastic way to utilize the equity that you have on your property. When you refinance your cash-out, you refinance your loan for a higher loan amount than you owe and save the difference. The proceeds you earn are tax-free. 

Many homeowners take cash out of their homes to pay off credit card debt with high interest and student loan debt. It is also possible to cash out to fund home improvements, education expenses, or anything else you need. Because the mortgage interest rate is less than the interest rates of other debts, a cash-out refinance could be a good option to pay off or consolidate debt. Furthermore, the interest on mortgages is tax-deductible, whereas the interest rate for other loans typically isn't.

You might be able to take cash from the property if you've paid for the loan long enough to create equity. Also, you may be able to cash-out refinance if your property value has increased. An increase in the property value indicates that the lender will offer you more money to help finance it.

Get a Lower Payment

A lower mortgage cost can mean more space in your budget to spend on other items. There are many ways to lower the cost of your mortgage through refinancing. 

The first is that you may be able to refinance at lower rates. If the rates are currently lower than when you purchased your home, you should talk to your lender to determine what your interest rate might be. A lower rate will mean cutting down on the interest portion of your monthly payments - and significant savings over the long term.

The second option is to refinance your loan to eliminate mortgage insurance. It's an annual fee to safeguard your lender in case you do not default on the loan. Mortgage insurance is typically only necessary when you place an amount of less than 20%. You can reduce your mortgage insurance costs by hundreds every month by refinancing and stopping the monthly mortgage insurance.

Thirdly, you can obtain lower payments by altering the mortgage term. Lengthening your payment term spreads your payments over longer periods and makes every payment smaller.

There are many ways you can lower your payment cost, so it's worthwhile to talk with your lender and see what they can do to help you make a payment within your budget.

Shorte Your Mortgage Term

A shorter mortgage term is a fantastic option to lower interest. Usually, shortening your loan term will result in a higher interest rate. A higher interest rate and fewer years of payment will result in significant savings over the long haul.

How does this work? Let's look at an instance. Let's say your loan is $200,000. If you took out a 30-year loan at a 3.5% interest rate, you'd be paying around $123,000 in interest throughout your loan. If you were to reduce the term by half, you'll be paying approximately $57,000 throughout your loan. That's an increase of $66,000, and it's not even accounting for the fact that a shorter term will provide the borrower with a lower interest rate and more savings.

One thing you should know when considering reducing the length of your loan is that it could raise your monthly mortgage payment. But less of your payment will be used to pay interest, and the majority of it is used to pay down your loan balance. It lets you increase your equity and get your home paid off quicker.

How long should I keep my house before refinancing it?

In most circumstances, you'll need to be in your home for a minimum of a year before gaining a substantial financial benefit by refinancing.

Things You Need to Evaluate Before Refinancing a Mortgage

Once you've got a clear purpose in mind, you'll need to look at your finances. There are four main things to take into consideration: your credit score, your monthly mortgage payment, the value of your residence, and your debt-to-income ratio (DTI).

Your Credit Score

Numerous internet-based resources allow you to check your credit score without cost. The information you have about your credit scores can enable you to understand the possible mortgage refinance opportunities you may be eligible.

Your Monthly Mortgage Payment

Understanding how your mortgage payment is incorporated within your budget can allow you to evaluate available options. If you're considering cash-out or shortening the term of your loan, it's important to determine how much allowance you have to make a larger monthly payment. If you're looking to lower your monthly installment, you need to figure out the amount you'll need to reduce your monthly payment for refinancing to be worth it.

The Value of Your Home

When you're looking to decide to refinance, it is important to conduct some study to determine the value of your house is worth. The lender isn't able to lend you more than your house is worth. Therefore, the appraisal value which is less than what you expected could affect your ability to refinance, especially if you're trying to cash out or eliminate mortgage insurance.

The best method to estimate your home value is to look at the price of comparable houses in your area. It is better if the sale is more recent.

Knowing the worth of your house can reveal the amount of equity you've earned. To calculate this, you need to subtract the current balance on your mortgage from the estimated value of your house.

Your Dept-to-Income Ratio

Another aspect to be considered is the amount of your DTI. DTI is the sum of all your monthly debt payments multiplied by your gross monthly income. DTI is a way for lenders to assess your capacity to repay the amount you borrowed.

If you paid $1,000 a month to pay your mortgage and an additional $500 to cover the remainder of your debts (such as credit card debt, auto loans debt, and student loans debt), your monthly debt would be $1,500. If your monthly gross income was $4500, the DTI proportion would rise to 33%.

The majority of lenders will require a DTI of 50% or less, and the highest DTI is determined by the kind of loan you receive. A DTI that is too high can limit your refinancing options or reduce the refinancing options you have.

Lower Your Payment

A lower monthly mortgage payment will mean you have more money to pay for other things in life.

Basics in Lowering Your Payment

  • Modifying the terms of your mortgage could increase your monthly earnings.
  • Check a Refinance Calculator to assess how a new rate and term could reduce your monthly mortgage payments'. Find out how refinancing your mortgage can help you save cash and taxes.

Every day, we assist our customers in reducing their mortgage payments monthly through refinancing. Contact us now, and we'll be there for you too.

Popular Loan Options to Lower Your Mortgage Payment

  • 1. FHA loan - Refinance an increasing mortgage bill by taking advantage of the fixed-rate security offered by the government-insured FHA loan.
  • 2. 30-Year Loan - If you are looking for a traditional lending alternative, get started today by taking out the 30-year fixed.
  • 3. Adjustable Rate Mortgage - Get the best rate on the market with a 5- or 7-year ARM that could potentially pay thousands lower than a fixed-rate mortgage over the initial five or seven years of the loan.
  • 4. VA Loan - Receive a lower rate and payment on the VA loan for qualified veterans, military members, or spouses. We can help you determine if you're eligible for the advantages of the VA loan.

By refinancing your existing loan, the total charges may be higher over the loan duration.

Frequently Asked Questions

How can I tell whether refinancing my monthly payment is worthwhile? You need to answer these two important questions:

  • 1. How much can I save? A lot may have changed since you purchased your home, such as the credit rating, home value, and mortgage rates. Should any one of them factors have increased, you must consider how you can reduce your monthly payment using a refinance calculator.
  • 2. Can the savings cover the costs? It's possible to include the expenses associated with getting a new mortgage in the total refinance amount to avoid paying any extra fees at the time of closing. However, refinancing to reduce your monthly payment could lead to a longer loan term which means paying more interest in the end.

Speak to a home loan expert or make use of the refinance calculator to determine whether refinancing your home could reduce your monthly payment.

What is refinancing and what can I do to get a lower monthly payment?

Refinancing your home refers to taking on a new loan with different terms. To reduce your monthly payments, you'll require a loan that meets any of the following requirements:

A Lowest Interest Rate

The higher your interest rate, the more you'll have to pay to finance your mortgage in the present and later on. A lower rate means a lower monthly payment when you don't shorten the duration of your mortgage term.

Gets Rid of the Private Mortgage Insurance (PMI)

If you've put less than 20% down on your initial home loan, you're likely paying for private mortgage insurance (PMI). If your home has appreciated, and you also have ample equity, you could refinance your loan to reduce the monthly cost of this hefty monthly payment.

Refinance into a Longer-term Loan

If you refinance to a longer-term loan, you're extending the amount you owe over a longer time. Although you may pay more interest in total, your monthly payments will be lower.

What is equity and how can you lower your monthly payment?

Home equity is the appraised value of your house plus the amount you owe on your loan.
The greater your equity, the higher the interest rate you could obtain on refinancing and help reduce your monthly payments. The equity you have can assist in eliminating private mortgage insurance (PMI), a significant monthly cost found in many mortgages with an initial down payment of less than 20%. Utilize the refinance calculator to determine if you have enough equity for lower monthly payments.

Pay Off Your Mortgage Faster

Reduce the amount of interest you pay and put that money to things that really matter.

The Basics of Paying Off Mortgage Faster

  • Make the most of the current low mortgage rates and shorten your mortgage term. Keep in mind that the shorter the term is, the lower the mortgage rate.
  • Check to see if you can save money by using a different term or lower interest rate using an amortization calculator or a refinance calculator.
  • There are a variety of ways to get your mortgage paid off more quickly, including cash-in refinance and your 15-year fixed. Do not forget to look into the YOURgage option, where you can select the term that fits your budget.

We help many Americans save money through refinancing every day. Contact Home Loan Expert today to find out what we can do to help you.

Popular Loan Options to Pay off Your Mortgage Faster

  • YOURgage - Refinance your loan to the fixed term of your preference. Your YOURgage lets you choose a period of between eight to thirty years. It means that you can repay your mortgage at the pace you prefer.
  • 15-year fixed. Get it today with a 15-year fixed and save thousands by paying less interest.
  • 15-year FHA - FHA loan is ideal for those who wish to bring less money to closing to who have less equity in their home.
  • VA Loan - This VA loan is a great benefit of military service and an ideal option for veterans looking to refinance to get their mortgage paid off more quickly.

Frequently Answered Questions

What is the best time to refinance?

The reasons to refinance your mortgage include lowering your monthly payment, shortening the mortgage term, or using the equity you've built over time to obtain cash back from your home. Refinancing your home is contingent on a variety of factors. Do you possess enough equity built up in your home? Are interest rates lower than they were before you got your home loan? Are you planning to stay in your house for several years? Speak to a Home Loan Expert or use a refinance calculator to determine if refinancing your home can help you reach your goals.

What are the benefits of a shorter repayment period?

You'll be able to own your house earlier than you could with your mortgage. It could place you in a more favorable financial position in the future and will save you some interest.

What are the drawbacks of a shorter repayment period?

As extending your loan term reduces the amount you pay each month, reducing your loan term will increase your monthly payment. Make use of a mortgage amortization calculator or a refinance calculator to know the new terms and corresponding monthly payments.

Consolidate Your Debt

Consolidate high-interest debts through refinancing at a low mortgage rate.

The Basics of Consolidating Debt By Refinancing Your Mortgage

Take advantage of some of the lowest rates for decades, and get cash to pay off high-interest debt. Do not wait too long - these cheap rates aren't going to be around forever!
Pay one monthly installment instead of several payments, and have lower monthly payments. In contrast to credit card interest, the interest paid on your mortgage can be tax-deductible.

Even if you've got less-than-perfect credit, we can help. Making payments on high-interest debts faster can boost your credit score. Check if you can lower your monthly payments or cash out to pay your other expenses.

Are you considering the consolidation of two mortgages? We can assist you with refinancing both loans at lower rates that can substantially lower your monthly mortgage payments.

Contact us today and find out what we can do for you.

Popular Optional Loans for Consolidating Debt

Please consult your tax advisor about the following options.

  • FHA Loan - Refinance your debt into one low-cost loan now.
  • 15-year fixed-rate loan - Consolidate and pay off your debt sooner by using our 15-year fixed-rate mortgage.
  • 30-year fixed-rate loan - Get peace of mind knowing the amount of your monthly payment with a 30-year fixed-rate loan.
  • 30-year fixed-rate loan - Get peace of mind knowing the amount of your monthly payment with a 30-year fixed-rate loan.
  • VA loan - This loan is available to veterans and active military members. They can consolidate debt at a low fixed rate.

Frequently Answered Questions

What can refinancing do to consolidate my high-interest debt?

The typical credit card interest rate is 15%. In contrast, the mortgage rate is currently within the 3%-4% range. If the current value of your house is greater than the current mortgage balance, this means there is equity on your property. You could utilize this equity to refinance or refinance your current mortgage and get cash with a low-interest rate to settle the credit card debt.

What can equity do to consolidate my debt?

Home equity is the appraised worth of the house less the amount you owe on the loan. The greater equity you have, the more cash you might receive from a cash-out refinance. Many homeowners use cash to pay off debt with high interest or to make improvements to their homes. Utilize the refinance calculator to determine if you have enough equity to meet your financial goals.

How much will it take to refinance?

You can add expenses associated with obtaining another mortgage into the total refinance to avoid paying any extra fees at closing. Refinancing to take cash out or consolidate debt could cause an extended loan term or a higher interest rate. It could mean you pay more interest over the long term. Contact a Home Loan Expert or utilize the refinance calculator to determine the possibility of refinancing your house to help you consolidate debt.

How often should you refinance your home?

Certain states have restrictions regarding how soon or often residents can refinance home loans. The limits are typically created to ensure that refinancing benefits homeowners. In addition to the regulations, it's crucial to ensure that refinancing will help you reach your financial objectives. Determining if it's appropriate to refinance your property is based on several factors. Will your current lender charge a prepayment penalty? Do you have ample equity built into your property? Are interest rates now lower than before you received your home loan? Are you planning to stay in your house for several years? Utilize the refinance calculator to determine the possibility of refinancing your home to assist you in achieving your goal.

Cash-Out Refinance

Enhance your financial objectives and improve your lifestyle with the cash-out refinance.

Basics of Cash-Out Refinance

Make use of your home equity to your advantage! Take money from your home and utilize it for whatever you'd like. Find out if it is feasible to refinance using the refinance calculator. Make home improvements to boost its value, pay the cost of college tuition, settle your high-interest credit card debt, or purchase a vacation home. We've helped hundreds of Americans lower their monthly payments through refinancing. Contact us today and find out what we can do to help you!

Popular Cash-Out Refinance Options

  • FHA loan - Refinance as much as 80% of the value of your home.
  • 30-year fixed-rate loan - The traditional mortgage with fixed payments is perfect for budgeting.
  • Adjustable rate mortgage - Save thousands of fees with our lowest affordable rates.
  • VA loan - Refinance as much as 100% of the home's value with the VA loan if you're a veteran, military member, or spouse.

Frequently Answered Questions

How do a cash-out refinance and a home equity loan differ?

Home equity loans, also known as home equity lines of credit (HELOCs), are typically second mortgages. They are mortgages you take out aside from the main mortgage you already have in your residence. These are considered second liens to your property and consequently riskier. Cash-out refinance is not a second loan; it's a fresh first mortgage.

How can equity help me get cash out of my refinance?

Home equity is the appraised value of your house less the loan balance you owe. The greater your equity in your home, the more cash you might receive from a cash-out refinance. Many homeowners cash out to pay off high-interest loans or invest in home improvements. Check out the refinance calculator to determine if you have enough equity to reach your financial goals.

How do you determine the cash you can get after refinancing?

In most cases, the cash-out amount is determined by subtracting the balance of the loan you had previously taken out from the total amount of the new mortgage loan. However, several other factors including applicable fees, the type of loan you have, and your equity, could affect the amount you receive as a final cash-out.

How much will it take to refinance?

It's possible to incorporate the expenses associated with a new mortgage into the total refinance to avoid paying any amount during closing. However, cash-out refinance could lead to longer loan terms or higher interest rates, which could result in paying higher interest in the long run. Contact a Home Loan Expert or use the refinance calculator to determine whether refinancing your home could help you get cash out.

Refinance an Investment Property

Quick, low-interest refinancing is essential to increase profitability and continued success.

Basics of Refinancing Your Investment Property to a Low Rate

Maximize the return on your investment by lowering the monthly mortgage payments and improving the rental income. Make use of the equity in the rental property to purchase additional property or to fund other investment opportunities. Contact us today and find out what we can do to help you.

Most Popular Loan Options for Refinancing Investment Properties

  • YOURgage - Our exclusive program lets you take control of your mortgage. Select a term between 8 and 30 years.
  • 30-Year Loan - Make sure you don't get caught off guard and ensure that your payments are guaranteed.
  • 15-Year Loan - Borrow from your equity at insanely low rates or pay off your investment quickly.

Frequently Answered Questions

What are the requirements to refinance?

The following list of documents is typically required for refinance applications:

  • 1. Proof of income: In most cases, you'll have to present the original pay stubs you received in the last 30 days.
  • 2. Copy of your homeowner's insurance: This verifies that your homeowner's insurance is current and has adequate coverage for your home.
  • 3. Copies of the W-2 Forms: These are required for every loan applicant and assist your lender to verify previous employment and income history.
  • 4. Copies of your asset information: It includes accounts holding funds to pay closing costs, statements for checking, savings, 401(k) accounts, and investment records for mutual funds or stocks.
  • 5. Copy of your title insurance: It helps your mortgage lender verify taxes, names on the title, and legal descriptions of the property.

How often should you refinance your home?

Certain states have limitations on the time or frequency at which often residents can refinance their home loans. The limits are made to ensure that the refinance process is beneficial to homeowners. While regulations are important, it's crucial to ensure that refinancing will help you reach your financial objectives. The decision of whether it's a good idea in refinancing your property depends on several aspects. Does your current lender impose prepayment penalties? Do you hold enough equity built up in your property? Are interest rates now lower than before you obtained your home loan? Are you planning to stay in your house for several years? Speak to a Home Loan Expert or use the refinance calculator to determine whether refinancing your home could assist you in reaching your goals.