#1: What is Refinancing?
Refinancing is the process of replacing an existing mortgage with a new loan. Typically, people refinance their mortgage in order to reduce their monthly payments, lower their interest rate, or change their loan program from an adjustable rate mortgage to a fixed-rate mortgage. In addition, some people may need access to cash in order to fund home renovation projects or pay off debts, and will leverage the equity in their house to obtain a cash-out refinance. The process of refinancing works in the same way as when you applied for your first mortgage. Take a look at some of our loan options here.
#2: What are some benefits to Refinancing?
- Refinancing will lower your monthly payment - You’ll be able to put your savings towards debts and other costs or apply the savings towards your monthly mortgage payment and pay off your loan sooner!
- Refinancing will reduce the length of your loan.
- Switch from an adjustable-rate mortgage to a fixed-rate loan - This will result in reliable and stable monthly payments, giving you the security of knowing that your payment will never change.
- Use the equity in your home to take out cash – use the money for home improvements, pay off debts, etc.
- Consolidate your first mortgage and your home equity line of credit (HELOC)
In our recent blog, find out 5 Smart Ways to Refinance your Mortgage.
#3: Should I refinance if I only plan on living in my home for a few more years?
Similar to when you initially purchased your home, you will have to pay fees, taxes and closing costs on your refinance mortgage. With that said, it’s important to find out how long it will take to reach your “break-even point” when refinancing. What is the break- event point? It’s the point at which the monthly savings created by a mortgage refinance offsets the cost of refinancing.
You may also want to consider how long it will take for the monthly savings to pay for the cost of the refinance. Find out how much you’re closing costs were for your original loan because refinancing costs may be the same amount. A common rule of thumb: proceed only if the new interest rate saves you that amount over about 2 years. Still unsure if refinancing is right for you?
#4: How does my credit score affect refinancing?
Your credit score is important! It will help determine your mortgage refinance approval along with the interest rate the lender will offer. The higher your credit score, the lower your interest rate is going to be. If your credit score has fallen since your original mortgage, you can expect to pay higher rates.
Yes, these loan options are available depending on your current situation. Contact your local EHL officer to find out if one of these options might make sense for you!
#6: Is NOW the right time to Refinance?
It’s important to crunch the numbers to see if refinancing makes sense for you. Loan programs and rates are always changing. These changes, along with rising home values may enable you to reduce your rate or lower your monthly payments. But you don’t have to go at it alone! Our expert Loan Offices at EHL are always ready to answer your questions and guide you along the path to a successful refinance.