At some point, homeowners may think it’s time to refinance their home. There are a variety of good reasons to refinance, but a big decision like this shouldn’t be made lightly. Thinking about your options and weighing the pros and cons for your situation are essential.
Reasons Homeowners Refinance Their Mortgage
Some of the most common reasons we see for choosing to refinance are:
- Lower interest rate. If your mortgage interest rate is two or more percentage points higher than the current offering, think seriously about refinancing.
- Cash out equity. Need cash for sending your kids to college, home renovations, or to pay off debt? Refinancing to pull out some of your home’s equity may be smart.
- Remove PMI. If refinancing a lower amount gets rid of expensive private mortgage insurance (PMI), it may be worth it.
- Move from variable to fixed rate. Reduce your risk of your variable mortgage rate increasing by refinancing into a fixed rate.
- Decrease length of note. Get out of debt quicker with a shorter-term mortgage.
- Decrease mortgage payment. Has your household lost an income? Refinancing to a lower rate or to increase your length of mortgage can decrease the strain on your monthly budget.
The Best Time to Refinance
Depending on your situation, there’s rarely a bad time to refinance. However, refinancing when rates are low is a prime time that offers distinct advantages. Another smart time is if your home has increased in value, which could help you get out from under PMI.
What Loan Options Are Available?
Homeowners wanting to refinance can choose from several loan options, including different lengths (15, 20, and 30 years are the most common). You can also pick a cash-out refinance or a regular one. You may choose to use an FHA loan or VA loan. In addition, homeowners don’t have to refinance their new loan with the lender they originally used for their mortgage.
How the Process Works
Contact a mortgage loan officer as you did when you first bought your home. They’ll pull your credit, take your application, review your finances, and walk you through your options. You will most likely need to get your house appraised and proceed to closing.
Should Homeowners Who Are Underwater Refinance?
Many people who refinance do so to tap into their home’s equity. What if you owe more on the property than it’s worth? There are refinancing options for you, too. If you’re underwater with your mortgage and can’t qualify for a traditional refinance, you may be able to use the Freddie Mac Enhanced Relief Refinance program. You may only use this if Freddie Mac owns your loan. Streamlined refinance programs might also be available to you. Your lender can help you navigate your options.
There are many great reasons to refinance your home. Think it could benefit you? Turn to a mortgage loan officer at Mortgage Investors Group to find the best refinancing rate for you.