Refinancing a home

Refinancing a home means you trade in one mortgage for a new one with different terms. 

Refinancing a home can provide many benefits that let you:

  • Lower the rate
  • Pay off the home faster
  • Get cash at closing
  • Remove someone from the mortgage
  • Get a home equity line of credit or HELOC
  • Get a better type of loan
  • Remove PMI or MIP

Lower the rate
Called a rate and term refinance, lot’s of homeowners refinance their home if rates drop after they buy it. This saves them money each month with a lower monthly payment. While not always the best way to look at a refinance, the most popular refinance rule-of-thumb when considering a refinance is if rates have dropped at least 1%. 

Pay off the home faster
Refinancing into a shorter term with a lower payment is a great way to pay off the home faster. Remember as well, unlike some other lenders, there’s no pre-payment penalty with any of our home loans. This allows you the freedom to pay extra whenever you want, paying off your home quickly. 

Cash at closing
Getting cash at closing means you’re increasing the loan amount to access some equity in the home. This cash can be used for many things such as 

  • Consolidating debts such as credit cards and personal loans.
    There’s no comparison, a mortgage rate is almost always much lower than the interest rate you pay on credit cards. Most homeowners can save up to $2,500 or more per month paying off high-interest credit cards.

  • Home improvements that increase the value of your home.
    Investments in your home are never a bad idea. If you want to go solar, build a deck, put in a pool, go with high-efficiency windows and doors, or even a new roof, A/C or plumbing, this is a great way to do it.

  • Renovations.
    If you want to do some upgrading to your home, a cash out refinance is a great way to do it without paying out of pocket to get it done. A mortgage allows you to finance the construction with a much lower rates than a credit card or personal loan most of the time.

  • Additions.
    Have you been thinking about adding a deck or putting in pool to your home?

  • A rainy day fund.
    In today's uncertain economy, no one knows when it'll rain and how hard. If you’re just wanting some security knowing you have some emergency cash on hand, cashing out some equity can provide it for you. If you have a big expense coming up, you might want to consider tapping into your home’s equity to pay for it. 

Remove someone from the mortgage
When couples get divorced a lot of times the person keeping the home has to refinance the mortgage into their name only, and have the other person removed from the mortgage. This is very common, and is considered a rate and term refinance with cause. 

Get a home equity line of credit or HELOC
A HELOC is like a credit card attached to the equity in your home. You don’t make any payments unless you buy something with the line of credit. Most of the time you make interest only payments for the first 10 years, then regular principle and interest payment for the rest of the repayment schedule. A HELOC is great for those who don’t want to access all their equity all at once, and only want to use the equity when needed. 

Get a better type of loan
Lot’s of homeowners start out in one type of mortgage because that’s all they could qualify for when they bought their home. But with time, better credit, and improved equity in the home, many refinance into a lower rate or fee home loan as soon as they can. Other owners might switch from an adjustable rate mortgage to a fixed rate mortgage when rates are low enough. 

Remove PMI or MIP
While you don’t have to refinance to remove PMI, many owners refinance to eliminate their private mortgage insurance while they’re taking advantage of some of the other benefits mentioned above. Others refinance out of FHA loans that have mortgage insurance premiums into conventional loans that do not therefore saving lots of money over the life of the loan.

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