Refinancing to lower your interest rate
Lowering the interest rate on a mortgage is the primary reason most homeowners refinance their home loan. Who wouldn’t want to lower their monthly mortgage payment if possible? To determine if the lower rate is enough to make a worthwhile difference for you, there are a few things we look at; first, how long do you plan on staying in this home? Second, what is the interest savings over the life of the loan? And finally, are those interest savings enough to offset the closing costs for the refinance? These are easy calculations for us to make and once on paper, the answer is usually very clear. Sometimes we are even able to help someone shorten the term of the loan, which means even greater interest savings.
Even if rates have not gone down, moving from an adjustable-rate mortgage (ARM), or a balloon loan, to a fixed-rate mortgage is often worth the cost of refinancing. In some cases, a slightly higher rate even makes sense to refinance for peace of mind that the rate won’t go up for the life of the loan. With an ARM, rates can go up significantly, depending on the terms of the loan and prevailing interest rates. Given the historically low rates we see today, chances are that the rates on ARMs will increase significantly over the coming years.
Refinancing to lower monthly payments
If you would like to lower your monthly payments/living expenses, refinancing your mortgage could perhaps be a way to do that. Life can throw us a curveball sometimes. Maybe daycare, medical bills, or other unforeseen expenses are eating into our monthly budgets. Refinancing your mortgage could possibly be a way to help with that. For example, even with the same rate, refinancing a 30-year mortgage that has 22 years remaining back out to another 30-year mortgage will lower your monthly mortgage payments.
There are a couple of downsides to this approach. First, you extend the time it takes to pay off the mortgage. Second, you increase the amount of interest you will pay. However, in some situations, lowering the monthly payment of your mortgage is more beneficial than struggling with a budget that doesn’t work.
Refinancing to receive cash out
Are you contemplating doing a home remodel or addition? Have you been thinking about purchasing a 2nd home or investment property? Maybe you have some other debt that you would like to payoff to eliminate those monthly payments. Doing a cash-out refinance may be a way to accomplish those goals. If you have equity in your home, you may qualify for a cash-out refinance. It might be a way to do a remodel or put an addition on your home without increasing your monthly mortgage payment. You may be able to purchase an investment property and use the equity in your home. These are just a few examples of what individuals do with a cash-out refinance.
Are you interested in learning about more options for refinancing, or how to obtain a mortgage through HomeTown Bank? Contact our qualified lenders at your hometown location to obtain more information!