There’s a lot of talk about refinancing homes right now with all-time low interest rates. Refinancing can be an excellent option if you’d like to take advantage of the lower interest rates or for other reasons. However, it is important to look into refinancing carefully before jumping in and applying. If you’re considering a refinance loan, learn more about what they are and what you need to know before you apply.
What is a Refinance Loan?
Refinancing is when you replace the existing mortgage with a new one. This is often done to reduce monthly payments, lower the interest rate, or to access cash in the home to pay off debts or tackle a renovation. To refinance a loan, you’ll go through a lot of the same steps as you would obtain a mortgage initially. There will be various options to consider, fees that need to be paid, and more just like when you obtain the mortgage.
Why Might You Want a Refinance Loan?
You may want to refinance for any number of reasons, including to reduce your monthly payment, to lower your interest rate, or to get rid of private mortgage insurance. Most people who refinance are able to save a significant amount of money on their monthly mortgage payment. Refinancing can also allow you to switch from an adjustable-rate mortgage to a fixed-rate mortgage or from a 30-year loan to a 15-year loan. You can also refinance to combine a mortgage and a home equity line of credit or to get cash from your home’s equity so you can handle necessary renovations or pay off debts and get your finances back on track.
When to Consider Refinancing
There isn’t really a “best” time to consider refinancing. The decision depends on what your goals are and why you plan on refinancing. If it seems like now would be a good time to refinance, go ahead and look into how much it would cost, how much interest you’ll pay on the new loan, and more. Talking with an expert will give you the chance to learn more about whether it’s the right time to refinance or if you might want to wait a little bit longer to see if you really want to refinance.
Steps to Take Before Refinancing
Before you decide to refinance, there are a couple of steps you’ll want to take. These include the following.
- Look into Your Credit Score – The interest rate you’ll receive if you refinance and whether you will be approved for a refinance will depend on your credit score. Find out what your credit score is before refinancing and, if needed, look into steps to raise it before applying for a refinance loan.
- Check Out the Remaining Loan Balance – Know what your remaining balance is on your current mortgage and how much equity you have in the home. Depending on how much you owe or how long you plan to stay in the home, it may not make sense to refinance right now.
- Determine the Fees for Refinancing – Just like obtaining a mortgage, there will be fees for a refinance. Find out what the fees will be for your loan and see what your break-even point will be. If it will take you a long time to break even, it might not be time to refinance right now.
How to Get Started with a Refinance
If you think a refinance might be right for you, the next step is to learn about the various refinance loans available. These include adjustable-rate mortgages, fixed-rate mortgages, FHA financing, HARP refinancing, and conventional refinancing loans. You’ll also want to consider whether now is a good time to refinance and then speak with an expert about your options. They’ll be able to give you more information on how the refinance works, what your specific benefits might be, and what you might want to do before refinancing. The information they can provide will be invaluable to you when you’re determining if it’s a good time to refinance right now.
Are you thinking about refinancing? With all-time low-interest rates right now, it’s the perfect time for many people to refinance their mortgage and start saving money. To get started, you’ll want to speak with someone who can review your information and give you specific advice on your next steps and what type of refinance loan might be perfect for you. Talk to a specialist from FHL today to get all the information you need to make the right decision for you, your family, and your budget.