Thinking about refinancing a home mortgage loan and not sure where to start? We're reviewing what to expect in a typical process and why you may want to refinance sooner rather than later.
What Does It Mean To Refinance Your Mortgage?
When you refinance your home loan, you're paying off your existing mortgage with a new mortgage. Homeowners typically take advantage of this refinancing option to reduce their interest rate and/or payment, or to change the terms of their mortgage loan (such as switching to a shorter or longer loan term).
You can also borrow against your home equity in order to receive cash. This “cash-out refinancing” option allows you to use proceeds from the refinancing to pay off non-mortgage debts or renovate your home.
However in 2018, you can no longer deduct the interest payments on extra funds pulled from refinancing, so renovation financing would likely be a better option if you’re planning on renovating your home. (Read more about how the new laws for taxes in 2018 will affect deductions taken for things like mortgage interest payments and property taxes.)
Should You Refinance or Build Equity?
Is it better to refinance your mortgage OR let the equity build up as much as possible? It really depends on your financial situation. If you’re in the position to refinance your home, that’s a sign you’re on the right financial path! It means your financial situation has given you options that can prove beneficial in the short or long term. It’s important to understand those options and make the best decision for your financial health.
7 Reasons to Consider Refinancing Your Mortgage
- You want to lower your monthly payments.
- You want to pay off your mortgage sooner.
- You have an adjustable rate mortgage.
- You have an interest-only loan.
- You have a high interest rate.
- You’re paying mortgage insurance.
- You need cash-in-hand to pay non-mortgage higher-interest debt.
(keep scrolling for our refinancing tips!)
"Is there any point to refinancing if my monthly payment amount doesn’t change?"
Yes! Even if you’d still pay the same amount every month after refinancing a home mortgage, it may still save you money if you can shave years off the life of your loan. You could pay off your mortgage early and save tens of thousands of dollars. This is why it’s so important to go over all your options carefully with a mortgage specialist to find out whether it's worth to to refinance your home.
Helpful Tips for Refinancing
You can save yourself money and create opportunities by refinancing a home mortgage, if done properly. To make sure your refinancing process is as successful as possible, bookmark these tips:
- Be prepared financially and with proper documentation.
- Understand the mortgage process.
- Avoid high fees and credit issues.
- Read the terms of the new loan carefully.
- Compare the benefits of the new loan vs. your current loan.
- Ask your lender about anything you’re not sure of.
Talk to Your Lender About Refinancing Options
Even if you wouldn’t expect to benefit from or qualify for refinancing, you should understand the process of refinancing your home and how it can benefit your household budget. You might be pleasantly surprised with the options your lender can offer!
Even if you decide not to refinance your mortgage after speaking with your lender, talking about the possibility can show you how your budget could potentially improve to create better mortgage lending opportunities in the future. A successfully refinanced mortgage can reduce your monthly payments, shorten your loan terms, and create opportunities with cash from equity.
Have questions? Give us a call! We're always happy to help you fully understand your options.