Refinance Your Home Loan
What you need to know to refinance your home loan.
What is refinancing a home loan?
Refinancing a home loan is the simple act of getting a new home loan to replace your existing one. The new loan pays off and closes your current home loan, and starts a new cycle of payments for your home.
Many people get into the habit of making their monthly home payment and don't pay any attention to it beyond that. But refinancing your home loan can bring about big benefits.
Why Refinance a home loan?
There are many factors that go into structuring a home loan, and those factors change over time. The overall economy, your credit score and your annual home income influence the type of loan you can afford. Taking the time every few years to review these factors will help you make a decision on if a home refinance is right for you.
Get a better interest rate. Current home loan Interest rates change based on a variety of factors, including the economy, and your credit score. Depending on when you are refinancing your home loan, you may be able to secure a lower overall interest rate. A loan at a lower interest rate will save you money over the full term of your loan.
Shorten the length of the loan. All home loans have a term, or length of the loan. Common home loans terms are 15, 20, 25, and 30 years, with longer loans being more popular. Over time, conditions change. If your annual household income has increased, or interest rates have decreased, you may find it's a great time to shorten your loan. If interest rates have decreased, it's possible that a shorter loan term is not that much more expensive than a longer loan term. This gives you ownership of your property much sooner.
Lower your monthly payments. Lowering your interest rate is the most common reason for a home refi. One way it can materialize is in lower monthly payments. But you can lower your monthly payments in another way: by increasing the term of the loan. While that may increase the overall amount you pay overtime, it will help you in the immediate term by giving your more money each month.
Change from one loan type to another. There are a variety of home loan options: adjustable rate, fixed rate, balloon payments, etc. Each loan type has their own pros and cons. At the time you acquired your original loan, one may have made sense at the time. But you may find yourself in a different life stage or circumstance where the original loan type no longer holds the same advantages.
How to Get Started with a Home Refinance.
Getting started with a home refinance is pretty simple. Have the details of your home loan gathered, which is usually available on your last home loan monthly statement. This would include knowing your monthly payment, your payoff value, and the current interest rate. After that, you simply need to call a financial institution that has home refinance options available.
The process is usually straightforward from there. With a few quick questions, a Mortgage Loan Specialist should be able to give you a good idea on if a refinance is right for you, and about how much money you can save.