Refinancing Guide
Benefits of Refinancing
There are many benefits to refinancing your home. How do you get the most value out of refinancing, and is it even the right decision for you? We can help you make the best decisions for your needs.
Is this a good time to refinance?
If one or more of the following scenarios applies to you, it may be a good time to look into refinancing:
- Your home has greatly appreciated in value. Occasionally, certain regions of the country experience a significant rise in home prices. Refinancing allows you take advantage of your home’s increased equity.
- Mortgage interest rates are falling. If market rates drop ½% to ⅝% below your current interest rate, it could be a good scenario for you to refinance your home. In a market where interest rates are falling, there are two potential benefits that could help lower your overall loan amount.
- The first option would allow you to shorten the terms of your repayment while still making the same or comparable payment amounts.
- The other option allows you to lower your monthly payments while keeping the same or comparable repayment term. Either way, you find yourself with a way to save money on your mortgage investment.
- You are early in your mortgage term. Refinancing at this point, when payments are mostly being directed towards interest, tends to benefit you more than later in the life of the mortgage when payments are going more toward the principal than the interest.
- We recommend not jumping into refinancing as soon as one of these factors, like falling interest rates, does come in to play. To make the best decision for you and your financial situation, you’ll want to consider all the contributing factors, such as how long you plan to stay in the home and how going through the process would help you achieve your long-term financial goals. If you are considering refinancing, we'll be happy to offer timely, expert advice.
What are the benefits of refinancing?
It’s important to remember that refinancing starts homeowners off with a new mortgage entirely; it takes them back to the beginning of the payment process. But, the benefits of starting over with a new mortgage may be entirely worth it. Homeowners are able to:
- Change their loan from a balloon or an adjustable-rate mortgage to a fixed-rate mortgage and thereby lower the risk of a changing interest rate.
- Decrease their monthly mortgage payments by lengthening the repayment term or changing to a lower interest rate.
- Benefit from the lower mortgage interest rates, allowing homeowners to decrease the interest costs over the life of the loan.
- Shorten the term of the loan and pay off the loan quicker.
- All of this frees funds to help consolidate other debts and put toward other expenses such as a college fund, retirement, home improvements or any other major expenses.
Best Way to Refinance
When making the decision to refinance, consider all your options and pick a plan that will best help you meet your financial goals.
What Types of Loans are Available?
Fixed Rate: With established and predictable monthly mortgage payments.
Adjustable Rate: The rate of an adjustable-rate mortgage is designed to change with the movements of the market index to which it is linked.
Cash-Out Refinance: This provides many traditional refinancing benefits, and lets you turn a portion of your home’s equity into cash to use however you like: paying off credit cards, medical bills, remodeling, college tuition, etc.
How Does Closing a Refinance Work?
As with the closing for your purchase, you’ll have several documents to sign at the closing for your refinance. Your former mortgage will be closed out, and you will begin again under the new loan structure established in your refinance agreement.
How Do You Prepare for Closing?
As your closing date approaches, you’ll want to be sure to stay in good contact with your loan officer. Although you’ve gone through the closing process before, you want to make sure the refinance process goes smoothly as well. Being prepared will always pay off in the end. Here’s what you’ll need:
- Documents: Verify that you have the documentation needed to move forward into closing.
- Credit: Review your credit history. To make sure you have good credit standing, refresh yourself on how your credit score is derived and also on ways to keep your credit clean.
- Insurance: Confirm that your insurance policies provide appropriate coverage for your home’s value and contents. Also, double-check that the policy reflects the name of your refinance lender as the payee for losses.
- Rate: Consult with your loan officer about locking in your interest rate before you close. Locking a rate before you close will provide protection for you if rates should rise before your closing date.
- Escrow: Examine your current loan’s escrow account and determine if a surplus or deficiency of funds exists.
- Closing Costs: Arrange to bring to your closing appointment a cashier’s check made out for the exact amount you’ll need.
We strive to make this process smooth for our customers. You should now be able to enjoy all the benefits provided by refinancing your home.
