Closing Day was a dream! The home buying process was long but so worth it!
You finally own your perfect home, and while your home may be perfect your loan may not be.
Life happens, things change. Circumstances often make us have to rearrange our priorities. The bottom line, the one constant in life is change.
So, while your home may still be the perfect home for you, your loan may not match your current needs or financial goals.
What happens when the perfect house doesn’t come with the perfect interest rate? Or maybe the payment ended up being more than expected.
Lots of life events happen that make refinancing your home an appealing alternative to staying in your current loan. Refinancing your mortgage can save you a lot of money over the life of your loan!
This guide is all about considering your options when it comes to considering refinancing your home.
How Soon Is Too Soon
Generally, after closing on your home, you’ll need to check your loan terms to determine how long you have to wait to refinance. Each type of loan is different.
Because every loan is different checking the terms of your loan is the most important prep work you can do when starting the refinancing process.
Am I Serious About Refinancing
Before you get too far into the process, you should ask yourself these questions:
First, do I have at least 180 days of on-time payments?
Second, how long do I plan on staying in this home?
Third, is my credit in good standing?
Review your answers to the above questions. If you are comfortable with your answers to the first two questions, you need to have a good idea of where your credit is.
Lots of places offer free credit reports that will give you a look at where your score stands.
I May Lose The Best Rate
Can I lose a good rate? You can absolutely lose a good rate, but sometimes you lose a good rate in favor of an even better rate. Interest rates can change all the time. Daily. Hourly. Weekly.
The best strategy, if you know you want to consider refinancing, is to track rates.
Tracking rates can be done by your refinance specialist. An Industry expert is often your best advocate when refinancing.
Why Should I Even Consider A Refinance
Refinancing your mortgage is a big event. When you refinance your credit will be pulled. Refinancing your mortgage also takes commitment.
Your loan professional will work through the process with you but it is important to know that when you chose to refinance you are investing your time into that next closing date.
We all know life is busy and refinancing your mortgage takes time. So if you’re comfortable with your payments why would you waste the time to refinance?
There are various reasons for refinancing. But choosing to refinance has to be right for you. It takes time, effort and impacts your financial journey. Always check with a Financial Professional when considering refinancing.
While there are many reasons why a refinance can benefit you, we’re going to look at the top five reasons why most people consider and ultimately refinance their mortgage.
The top reason for refinancing is always saving interest. Five years ago when you went to your closing day you were happy with your rate and comfortable with your payments. But that was in the past.
Recently friends and family buying homes seem to be getting great rates and you’re starting to wonder if you should consider refinancing.
If the thought has crossed your mind you owe it to yourself to research rates. Rates fluctuate all the time, and checking to see if you can cut yours is always a good idea.
If you can cut your rate or your term you should consider the refinance.
Shorten Your Term
This is a great reason to refinance. Your lender will help you evaluate options. Lowering your rate is only one way to save interest.
Sometimes you can cut the term of your mortgage from a 30 year to 15 or 20-year loan. This way you save not only on the rate but also on the total interest paid over the life of the loan.
When you shorten the term of your loan you are setting yourself up for financial freedom from house payments are an earlier age.
Changing The Type Of Loan
The variety of loans that are offered to homeowners can be overwhelming. While each loan serves its own purpose, ensuring your loan is right for you is a good way of determining if refinancing your mortgage the best option.
Whatever circumstances led you to choose your initial loan may have changed. While starting out with an FHA Loan or an Adjustable-Rate Loan may have been the best choice during your home buying process, things often change.
This can commonly be the perfect scenario for a refinance. There are a variety of loan products offered because every home-buying scenario is unique. Going from an adjustable-rate mortgage to a fixed rate is an easy refinance.
Locking in a fixed-rate loan also creates confidence and stability. Knowing your monthly payment is constant will always help with your budget.
Life Necessitates Extra Cash
Owning your own home is an amazing adventure. The only downside is that homes need maintenance. Sometimes that routine maintenance just isn’t enough.
Even new homes will have needs. Sometimes the needs are small and can be absorbed into your regular budget. Other times the needs or repairs are huge and require a great deal of cash.
Larger repairs can be needed at any time, that’s just a fact of homeownership.
For example, the HVAC dies, or a Master Bathroom needs a renovation. Whatever the case may be, equity can be your solution. This means refinancing your mortgage may be a solid option.
Lots of people refinance to get cash out. Cash-out refinances are done to access the equity in your home for a wide variety of reasons.
Renovations or repairs are not the only reason to tap into your homes’ equity. People can use their equity for many things, perhaps you are amid financial hardship and need some cash.
Or maybe there’s a large looming purchase and you’d rather pay cash. Or even a life change such as a divorce or marriage and you need the cash to help.
Whatever the reason is that you need to put your equity to work for you, there is a possibility you can get cash out. Your local Industry expert can help with this. They know the requirements and regulations and are your best bet for determining if this is a good option for you.
More and more people are putting less than 20% down on homes. With all the mortgage options, people are opting to have PMI and keep the cash in their pockets.
PMI or Private Mortgage Insurance is an additional expense on your monthly payment. The PMI threshold is 20%. If your loan is for more than 80% of the value of your home you will have PMI.
What a lot of people fail to realize is that PMI does not automatically drop off the loan once that ratio has been met. The consumer (homeowner) is responsible for tracking home values and loan balances.
Typically, in a refinance an appraisal will be ordered and if equity is greater than 80% PMI can be dropped. Dropping PMI alone can save the homeowner money.
Making Sense Of Your Mortgage
The Mortgage Industry is intense. So many products and providers flood the market. That makes wading through the information seem insurmountable.
The simple solution is to be your own advocate. If you do not know where to start, that’s okay. Plenty of information can easily be found on the web.
Trustworthy sites will provide educational information that helps you gain understanding.
Start with your current mortgage. Remember, it met your needs during the home buying process and has served you well to this point.
Read the terms, check the rate. Make sure you know what you have currently got before you start looking for a new loan. If that seems overwhelming, get connected with someone who can help you.
Mortgage professionals know the ins and outs of the Industry. They not only learn each product but keep current on requirements and changing regulations.
Making A Change
Refinancing your home can be very rewarding.
It’s all about your personal circumstances. Is the time right? Is the best loan available for you? Will a refinance allow you to accomplish what you want to financially?
Do you think you are ready for your next closing day? Contact RealFi Home Funding and speak with an expert today, we can evaluate your situation together and come up with the strategy that works best for your needs.
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