When it comes time to choose a loan program for refinancing, the countless options can quickly overwhelm the uninformed. Before you commit to a plan that doesn’t meet your needs, take the time to explore all of your mortgage refinance options with professional assistance. We can guide you to select the loan program that can fit your financial situation the best. If you’d like, you can reach us at 562-584-4408 to begin the process immediately. Otherwise, this brief article will explain your basic mortgage refinance options and help you move towards a decision.
Do you want to lower your interest rate to something more manageable and sustainable, so your mortgage payments don’t raise up out of control? If so, applying for a low, fixed-rate loan might be the right choice for your needs. This may be necessary if you currently have an ARM (Adjustable Rate Mortgage) or a high fixed rate mortgage with payments beyond what you can comfortably pay.
Even if market rates come up later, unlike with your ARM, your fixed-rate mortgage will be locked in to the same rate independent of market fluctuations. If you are not expecting to move in the near future (about 5 years), a fixed-rate mortgage can be a great choice.
However, an ARM isn’t necessarily a bad thing if you plan to move or might move in the next few years; the initial low payment on such a mortgage can be a wise choice, allowing you to enjoy a higher-value home with much lower payments.
Is your refinance goal primarily to “cash out” some home equity? Maybe you want to update your kitchen, pay your child’s college tuition bill, or go on a special family vacation. In this case, you will need to get a loan higher than the remaining balance on your existing mortgage. With this goal in mind, you’ll need to qualify for a loan for more than the balance remaining with your present mortgage.
If you’ve had your existing mortgage for quite a while and/or have a high interest mortgage, you could be able to do this without making your monthly payment bigger, putting cash in your pocket today with minimal downsides.
This is of course contingent on your credit, your history of payments, and the terms of your existing mortgage; you’re not going to have these sorts of mortgage refinance options if you’re already financially overextended.
Do you want to cash out a portion of your equity to consolidate other debt? Good idea! If you hold some higher interest debts (such as credit cards or vehicle loans), you might be able to take care of that debt with a lower rate loan with your refinance, if you have the equity built up to make it work. You’ll owe the same amount of money, but it will likely be under the much better terms—meaning you’ll pay much less over time, in most cases.
If your mortgage is in good shape and you have untapped equity, this is a zero-downside way to cut down the money you spend in interest on other debts.
Do you need to build up home equity quicker, or simply want to pay off your mortgage more quickly? If this is your hope, your refinance loan can move you to a mortgage program with a shorter term, like a 15 year loan.
With this you will be paying less interest over time and growing your equity more quickly, but your payments will be more than they were. Conversely, if your current long-term mortgage loan has a small remaining balance, and was closed a while ago, you may even be able to make the switch without paying more each month.
Homeownership is a big part of the American dream. If you’re ready to refinance, let us know! We’re experts in helping people just like you refinance their mortgage. If you have questions about home loans, or how to begin your own process, contact us today.
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