To refinance is to replace (payoff) your current mortgage with a new mortgage. The refinance transaction is far easier and less intrusive than the purchase mortgage transaction and the goal of any refinance is to, in some way, work in your favor.
What are the reasons home owners refinance?
By no means an exhaustive list, the more common reasons to refinance can be one or more of the following:
- Lower your interest rate and payment
- Remove or reduce mortgage insurance
- Replace an adjustable rate with a fixed interest rate
- Replace a fixed interest rate with and much lower, adjustable rate
- Combine a first and second mortgage into one for a lower payment
- Pull out cash for debt payoff, home improvement, investment, college tuition or some other need
When is the right time to refinance?
It’s not always easy to know when a good opportunity awaits and that’s ok. Many times, all we need is a mortgage statement and a conversation with you to learn a few key pieces of information and we can provide useful feedback regarding your refinance prospects. Here are some instances where it wouldn’t hurt to do a mortgage check-up:
- The value of your home (equity) has increased significantly
- Interest rates have lowered
- Interest rates have increased (and you have an adjustable mortgage or line of credit)
- Your non-mortgage debt payments are making thing a little too tight
- You’ve decided you want to embark on a home improvement project
- You’ve determined you will sell the home within 5 years
Sometimes, secondary financing is the answer.
What is secondary financing? A second mortgage such as a home equity line of credit or a regular fixed rate second mortgage. Example: You want to pay off $40,000 in consumer debt with a first mortgage refinance to lower your overall monthly outgo but there’s one problem; your current first mortgage interest rate is far lower than current market first mortgage interest rate. The solution, many times, is to pay off all consumer debt with a second mortgage. This way, you keep your low interest rate first mortgage and replace $1,000 - $1,200 in consumer payments with a $350-ish second mortgage payment.