You’ve probably heard by now that refinancing your home loan may result in benefits like lowering your monthly mortgage payments. But how does that work, exactly?
Refinancing your current mortgage means that you’ll actually be getting an entirely new loan. This is an opportunity to obtain a lower interest rate or shorten the length of your loan period. You can even gain access to cash in order to pay off other debts or fund a home renovation project with a loan called a cash-out refinance.
Top Reasons to Refinance:
- Lower your monthly payment
- Get a lower interest rate
- Pay off your home loan faster
- Turn your equity into cash
- Get rid of Private Mortgage Insurance (PMI)
- Switch to a fixed-rate mortgage
Typically, refinances close faster than purchase transactions and may require less paperwork. Because it is a new loan, closing costs will often be required. The type of refinance that is best for your specific situation will depend on what you are trying to accomplish.
A rate-and-term refinance will allow you to obtain a new rate, a new loan term (length of your mortgage), or both. You might choose this type of refinance if you wanted to reduce your 30-year mortgage to a 15-year mortgage or reduce your interest rate. If you qualify for a lower interest rate, your monthly mortgage payments could be lower – resulting in more cash in your pocket each month!
A cash-out refinance replaces your existing mortgage with a loan amount above what you owe on your home. It pays you the difference between your loan balance and the home’s value. With home values rising all over the country, you may have enough equity in your home to use it for things such as a home renovation project, going on that dream vacation or paying off debts. These typically have higher interest rates than rate-and-term refinances.
Your needs as a homeowner today may be different from what they were when you originally purchased your home. Eagle Home Mortgage is here to help you assess whether a refinance is the right choice for you and guide you through your new financing journey. You can get started today by getting pre-qualified using Eagle’s Digital Mortgage.