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How Do I Know If It’s a Good Idea to Refinance My Mortgage?

You Ask, We Answer: How Do I Know If It's a Good Idea to Refinance My Mortgage?Are you interested in paying less per month on your mortgage? Or perhaps you would prefer if your mortgage was paid off a couple of months – or years – faster? If you are a homeowner with a mortgage, one option that is open to you is refinancing. In today’s post, we will explore the topic of mortgage refinancing and how to know if it is a good idea.

How Does Refinancing Work?

In short, refinancing is a process in which pay off your existing mortgage and borrow a new mortgage under a different set of terms. In most cases, homeowners will use the funds from the new mortgage to pay off the old one. Depending on the terms of your new mortgage, there may or may not be cash left over which you can use to invest, pay down debts, make renovations or for other purposes.

Refinancing To A Lower Interest Rate

Mortgage interest rates tend to fluctuate over time and because of this, refinancing to a mortgage with a lower rate is quite popular. If you initially borrowed your mortgage when interest rates were at 5%, you may be able to lock-in a new mortgage at a lower rate. Note that it can be tough to try to “time” the mortgage market, so check in with your mortgage professional to find out if the time is right.

Refinancing For Lower Monthly Payments

Another great use of refinancing is to reduce the monthly payment required on the mortgage. If you have ten years remaining on a 20-year mortgage, refinancing to extend the payments out to 15 years will lower the monthly payment.

Refinancing To Eliminate Other Debts

Finally, many homeowners will refinance their mortgage to use some of the home’s equity to pay off other debts. For example, a family might have $25,000 in debts that are being charged a higher interest rate than their mortgage. If they have built up enough equity, they can refinance and draw out $25,000 from the home’s value. This shifts the debt from the higher interest areas into the mortgage, where it can be paid off over time.

As you can see, there are many reasons why you might want to refinance your mortgage. To learn more about the refinancing process, or to discuss your options, contact us today. Our professional team of mortgage advisors is ready to help you choose the path that best suits your financial needs.

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A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA Mortgage

A Step-by-Step Guide to Refinancing a Traditional Mortgage to a FHA MortgageRefinancing a mortgage can provide a homeowner with many benefits, and many are interested in refinancing their traditional mortgage into an FHA mortgage to take advantage of low interest rates. Depending on the specific circumstances, this step may lower the monthly payment, reduce interest charges, adjust the loan term so that it is more beneficial for achieving financial goals and more. Those who are interested in refinancing in an FHA mortgage may consider these steps.

Understand the Rules and Requirements

There are specific rules in place regarding refinancing under the FHA program. For example, the loan amount may be up to 96.5 percent of the value of the home, but the homeowner cannot take cash out of the refinance transaction. If cash is taken out, the loan-to-value limit under the FHA program is usually 86 percent of the property value. 

Review Goals and Current Mortgage Details

The next step for homeowners to take is to review their own financial goals and to define their reasons for refinancing. In addition, it is important for homeowners to contact their current mortgage company to learn more about their current interest rate, if there is a prepayment penalty and the current loan balance. Estimating the property value is also important. Homeowners may have a reasonable idea about property value, or they can contact a real estate agent for a valuation. When all of this information is taken into account, the homeowner will have a better idea about what to expect from refinancing.

Each homeowner will be in a unique situation regarding current loan details, property value and goals that they want to achieve through refinancing. It can be confusing to decide if refinancing is the right move to make, and it can be even more complicated to determine which loan program is a best-fit for the goals of the homeowner. Those who are interested in refinancing from a traditional mortgage into the FHA loan program may contact a mortgage broker soon to discuss the options and to determine if this is a best fit option for them as a first step in the loan process.

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FHA Streamline Refinance Mortgage Loan Program

FHA Streamline Refinance Mortgage Loan ProgramRefinancing a home loan can provide numerous benefits, but it can also seem daunting and intimidating to some. Many homeowners would love to lower their interest rate or take advantage of other benefits associated with refinancing, but they are concerned about the time and expense associated with refinancing their current mortgage. The FHA Streamline Refinance loan program is designed to provide those who currently have an FHA loan with an easier way to refinance their mortgage, and this may be a desirable option for many.

No Appraisal Needed

One common complaint that people have when applying for refinancing relates to the expenses and time, and the appraisal can have a big impact on both of these factors. The good news is that with the FHA Streamline Refinance loan program, there is no requirement for a new appraisal. The home value at the time of the original loan will be used with the refinance loan, and this is truly beneficial for those who are currently underwater with their home value due to decreasing property values.

Lower Interest Rates

With the FHA Streamline Refinance loan program, borrowers can take advantage of today’s interest rates without needing to go through a full refinance process. This loan program is available to those who have a current FHA loan program, and it is a great program for those who have an interest rate that is higher than the current rates to lock in a lower rate and a lower mortgage payment.

Great Loan Terms

As with the traditional FHA loan program, the Streamline program also offers great loan terms. Borrowers can choose between a 15 and 30-year fixed rate loan, and borrowers will not be subject to a prepayment penalty. These loan terms provide borrowers with flexibility when refinancing their loan to take advantage of a lower interest rate.

The FHA Streamline Refinance loan program is just one of several options available to borrowers who are interested in refinancing their current FHA loan program. It offers numerous benefits to homeowners, but it is not the only option available.

It is wise for homeowners who are interested in refinancing their current mortgage to compare all of the options thoroughly before making a decision. It is best to seek assistance from a trusted mortgage professional. They can help with specific information and guidance with the selection of the right a loan program for each homeonwers needs.

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Can You Refinance into a VA Mortgage from Another Type of Mortgage? Yes, If You Qualify

Can You Refinance into a VA Mortgage from Another Type of Mortgage? Yes - if You Qualify VA mortgages stand out as one of the biggest benefits to men and women serving in the military. Although private lenders make the loan, the Department of Veterans Affairs guarantees all VA mortgages, which is why these loans come with favorable terms and benefits not found with other mortgage types.

The Benefits Of Refinancing To A VA Mortgage

A VA loan may very well be the borrower’s only option for putting no money down, as many lenders will cover 100% of the value of the home, thanks to the backing of Veterans Affairs. There is a ceiling on the amount covered depending on the area of the country, so contacting a qualified VA mortgage professional is the preferred way to discover limits locally.

VA loans also require no mortgage insurance, cover many of the costs associated with closing or refinancing and, in many cases, have lower mortgage rates than comparable loans.

Veterans who had never considered a VA mortgage may wish to take advantage of the flexible terms and the favorable market to refinance their current mortgage into one that offers tremendous benefits.

Qualifying For a VA Mortgage

Veterans Affairs mortgages are limited to service men and women and their spouses, a benefit for serving their country. After a set amount of service time veterans are able to apply for a certificate of eligibility that will allow them to apply for the loan.

Those who are eligible include most military members in active duty, members of the National Guard, veterans both discharged and retired, military academy cadets as well as any spouse of a deceased serviceperson.

Eligible Homeowners Can Refinance Through Cash-Out Refinancing

The Department of Veterans Affairs considers a conventional mortgage to VA mortgage refinancing to be the same as cash-out refinancing and treats it accordingly.

This process is as intensive as an initial mortgage because it will replace the current mortgage altogether, so all applicants are expected to go through the standard credit and underwriting process.

VA loans are incredibly beneficial to current military members as well as retired veterans who may have never considered taking advantage of the program. Although the mortgage can cover 100% of the value of a home, the actual amount varies depending on the area. The only way to know for sure how much will be covered and whether it’s the right time to refinance is to contact a mortgage professional who has experience with VA mortgages.

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Refinancing Your Mortgage: Understanding the Various Types of Refinancing

Refinancing Your Mortgage: Understanding the Various Types of RefinancingWhether you’ve been thinking about ways that you can draw on your home equity to fund a renovation project or you want to take advantage of low interest rates before they rise again, refinancing your mortgage is an excellent option.

In today’s blog post we’ll introduce mortgage refinancing and discuss a few of the ways that you can use this tool to help accomplish your financial goals.

Cash-In and Cash-Out Refinancing

Many homeowners refinance their mortgage in order to take some of the home equity out for other purposes. In a “cash-out” refinancing, you take out a new mortgage loan which is greater in value than your current loan. After paying off the existing mortgage you’ll receive a check for the difference which can then be reinvested in home upgrades or put to use elsewhere in your financial portfolio. You may also be able to get a better interest rate in this type of refinancing, saving additional money over the long term.

Do you owe more on your mortgage than your home is currently worth but still want to take advantage of lower interest rates? If so, “cash-in” refinancing is an option that can help you to avoid the mortgage insurance costs that you may be facing when you refinance. As the name implies, cash-in refinancing will provide you with a loan that is for less than the amount that you currently owe, so you’ll need to add “cash-in” to make up the difference.

Home Affordable Refinance Program or “HARP” Refinancing

If you find that you’re unable to refinance your mortgage as the value of your home has declined, the federal government’s Home Affordable Refinance or “HARP” Program may be an option. If you have been making your mortgage payments on time, have a mortgage guaranteed by Fannie Mae or Freddie Mac and your current “Loan to Value” ratio is greater than 80% it’s likely that you’ll qualify for HARP refinancing.

The above are just a few of the ways that you can refinance a mortgage to better suit your needs and financial goals. Contact your local mortgage professional today to learn more about refinancing and to discuss how you can tap in to the home equity that you’ve built up over time.

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Refinancing Your Mortgage? Know These Key Terms Before You Sign Your Paperwork

Refinancing Your Mortgage? Know These Key Terms Before You Sign Your PaperworkWhen it comes to your mortgage, there are a lot of key terms that are important for every homebuyer to know, and this is no less true than when it comes to refinancing your most important investment. Instead of leaving what’s unknown up to chance, it’s important to be aware of exactly what you’re looking at so you can get the best mortgage product available. If you’re currently considering refinancing and don’t want to get snared by unknown terminology, here are some terms you’ll need to watch out for.

Cash-Out Refinance

This type of refinance is a transaction where the home’s mortgage amount is higher than the existing mortgage amount, and cash-out refers to the extraction of equity from the homeowner’s home. While this type of refinancing can be a means of tapping into extra cash to help you with monthly expenses, it also means that the cash you take out of your equity will be added to the balance you already owe on your home.

Rate-and-Term Refinance

This type of mortgage transaction involves the refinancing of an existing mortgage so that you can take advantage of a different interest rate. While this type of change will not alter the amount of your home loan, it will adjust the interest which means that your monthly payments may be lowered and your may have a shorter amortization period due to overall reduced costs. These types of loans can often come with lower interest rates than cash-out refinances.

Streamline Refinancing

This type of refinancing is offered by the Federal Housing Administration (FHA) and the Department of Veterans Affairs, and it is also offered by certain financial institutions. While this type of refinancing has its own set of stipulations, it is directed at those who want to take advantage of low interest rates or get out of an adjustable rate mortgage (ARM). While you may need to have a financial appraisal done in order to qualify for this option, it’s also possible that this will not be required to qualify.

There are a lot of key terms that go along with having a mortgage and refinancing it, but if you’re considering your options it’s very important to know what all of them mean so you can be sure you’re making the best decision. If you’re currently considering refinancing your home and need helpful advice, contact your trusted mortgage professional for more information.

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Understanding the Jumbo Mortgage and Why Refinancing These Mortgages is Different

Understanding the Jumbo Mortgage and Why Refinancing These Mortgages is DifferentIt seems like everything is getting jumbo sized these days. Jumbo sized soft drinks. Jumbo sized fast food meals. Jumbo sized smartphones. But one thing that nobody thought would get jumbo sized? Is mortgages.

So what exactly is a jumbo mortgage? How is it different from a standard mortgage, and what does that mean for your refinancing options? Here’s what you need to know.

Jumbo Mortgages: Larger Sums For Enterprises And Wealthy Buyers

As the name implies, the main factor that sets jumbo mortgages apart from standard mortgages is the loan limit. Fannie Mae and Freddie Mac impose mortgage limits all around the country, limits that vary depending on the cost of living in each individual state. But in situations involving highly valuable real estate – like luxury properties and commercial real estate – standard mortgages simply don’t give buyers the freedom they need.

Jumbo mortgages are also common in areas with high costs of living, where real estate frequently surpasses the standard loan limit in high-cost areas.

How Do You Qualify For A Jumbo Mortgage?

As would be expected when higher sums of money are involved, the eligibility requirements for a jumbo mortgage are much stricter than for a traditional mortgage. Jumbo mortgages aren’t subject to private insurance, which typically means a down payment on a jumbo mortgage will be significantly larger compared to a standard mortgage. That also means people applying for jumbo mortgages must demonstrate to lenders that they have the income and wealth to pay the debt.

Jumbo mortgages also require a higher credit score. While most buyers can get a mortgage with a decent interest rate if their credit score is 660 or higher, buyers applying for a jumbo mortgage need a credit score of at least 700 to even be considered by most lenders.

Jumbo mortgage lenders can require borrowers to have at least 6 months worth of payments set aside in a bank account at the time of closing, while the requirement is typically two months for most mortgages. If you want to qualify for a jumbo mortgage, you’ll also need to prove to your lender that your debt-to-income ratio is below 45 percent.

Larger Sums Make Refinancing More Complicated

When trying to refinance a jumbo mortgage, you’ll face tighter restrictions compared to a standard mortgage. You’ll need to have a significant amount of equity in your home before you’ll be considered for refinancing. And if you’re planning to roll your HELOC debt into the refinancing plan, you’ll have to ensure that you haven’t made any deductions against your home equity for the past 12 months.

Some lenders may also have other special requirements when refinancing a jumbo mortgage. For instance, if you’ve owned your home for less than a year, you might have to opt for a Freddie Mac or Fannie Mae loan – and regardless of what fair market value is for your property at the time you file for the mortgage, it will usualy be assessed at its original purchase price if you’ve owned it for less than a year.

Jumbo mortgages can be a great way to buy a luxury home or commercial investment property. But in order to be issued a jumbo mortgage, you’ll need to meet a strict set of requirements.

If you’re considering a jumbo mortgage, a professional advisor can help you understand your options. Contact your trusted mortgage professional to learn more about refinancing options and how you can qualify for a jumbo mortgage.

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