Do you want fewer monthly expenses and more cash in your pockets? Then you might want to consider a mortgage refinance — and soon.
If you’ve owned your home for a few years or more, you’re likely paying more than you need to for your mortgage. Today’s mortgage rates are at historical lows, and applying for a mortgage refinance could help you save money, lower your monthly payments, or even pay off that mortgage in less time — all huge benefits for your bank account.
Why Apply for a Mortgage Refinance?
Refinancing your mortgage can have a big impact on your financial situation. If you refinance to a lower interest rate, it means your monthly payment gets lower — and that equals fewer dollars out of your bank account month after month, year after year. It also means more of your cash goes toward the principal balance, rather than interest. In the end, that means you pay off your loan sooner — at which point, you won’t have to make a single mortgage payment ever again!
If you’re happy with your monthly payment but would just like to shorten your loan term, you can do that, too, by refinancing to a shorter-term loan like a 10-year or 15-year. If you don’t plan to be in the home for a full 30 years or you simply want to free up your money from those monthly payments, this can help you achieve that in a shorter time span.
A mortgage refinance is also a good option if you need a quick infusion of cash. Using a loan called a cash-out refinance, you can leverage the equity you already have in your home for cash—cash you can use toward college tuition, paying off credit card debts, or making home repairs or upgrades. It’s essentially like a lower-interest-rate credit card, with your home as the collateral.
Applying for a Refi Mortgage
The mortgage refinance process will operate much like your original loan application did. You’ll need to provide plenty of documentation about your finances, your debts, your income and your accounts, and your lender will need to verify your employment. They’ll need to do the same for your spouse, verifying their job and income details, if you’re applying for the loan jointly.
Should you choose to refinance, you don’t have to use the same lender as you did on your original loan. Because a refinance technically pays off your initial mortgage and opens up a new one (albeit a shorter-term, lower-interest one), you can choose any lender you want based on their rates, reviews, or other factors that matter to you.
Make sure when you apply for your refinance, you lock in your rate early. Mortgage rates are always in flux, so you don’t want to lose out on a lower rate just because you took too long getting started. As today’s rates are historically low (and have the potential to rise as the year goes on), you’re best served by locking in the lowest rate you can now.
We recently put together some tips on how to speed up your refi and make the process easier and more manageable. Be sure to check it out before you get started on your refinance.
Refinancing isn’t your only option if you need cash or want to save on your mortgage. There is also something called a HELOC, which can help you get cash using the equity in your home, or you can use piggyback loans to shorten your loan term. If you’re not sure which is best for your specific financial situation, make sure to talk to a professional loan officer for guidance. They can point you to the best product for your needs.
You should also get a look at your full credit picture before applying for a refinance. How is your credit? Have you had a lot of late payments? Is anything in collections? What’s your FICO score? The better your credit and financial history, then the better refi rate you will qualify for. If you’re not feeling confident about your current credit picture (or your spouse’s!), then you may want to put off applying for that refi for a few months while you work on improving your financial health. It will make the refi process easier and more affordable in the long run.
Have Refi Questions?
If you’re worried about the refi process or are unsure refinancing is the right choice for you, get in touch with an Embrace loan officer today. We’ll help point you in the right direction, and we can even see what rates you qualify for and lock you in before it’s too late. Get in touch now for more information.