What You Need To Know About Your Refinance Mortgage

Refinancing means paying off your existing loan by taking out a new loan. Homeowners usually refinance for one of three reasons:

• To save money, by getting a new loan with lower payments.
  
  
• To avoid interest rate hikes, by refinancing an Adjustable Rate mortgage into a Fixed-Rate mortgage.
  
  
• To convert home equity into cash, by using their home's value to get a loan that pays off their original mortgage — with money left over.
  

Refinancing To Save Money
If your goal is to save money, you have three basic options when you refinance:

Lower Interest Rates. Because interest rates are constantly changing, you could find a new loan with a lower rate than your original loan. Refinancing into a loan with a lower interest rate can mean lower payments.

Longer Term. If you're having trouble making your monthly payments, you can refinance into a loan with a longer term. For example, you could convert a 15-year mortgage into a 30-year mortgage. Because the payments will be stretched out over a longer amount of time, the monthly payment will be smaller. But remember, a longer term means paying more interest over the life of the loan.

Shorter Term. If you're meeting your monthly payment with plenty to spare, you can refinance into a shorter term. Your monthly payment will go up, but you'll end up paying less in interest. This could save you thousands over the life of the loan.

Refinancing To Avoid Interest Rate Hikes
Many homeowners make their first home purchase with an adjustable rate mortgage. These mortgages feature low introductory interest rates for a set period of time — usually 3 or 5 years.

After that initial period, the interest rate on the loan adjusts to reflect rates in the current market. This adjustment is called a “reset.”

As long as interest rates stay low, the increase on the loan can amount to very little. But if interest rates are higher, the monthly payments on the loan can jump dramatically.

To avoid this sudden hike in interest rates, many people refinance into a fixed-rate mortgage. The fixed-rate mortgage will have higher rates than the initial rate on an adjustable rate mortgage, but will keep the same rate for the life of the loan — so the borrower is protected against further rate hikes.

Refinancing To Convert Home Equity Into Cash
Homes are one of the few investments that almost always increase in value. Refinancing lets homeowners convert that value into cash.

When you tap into your home equity, you take out a new mortgage, getting a loan for some of the value of you home. The new loan pays off your old one, and you get all that’s leftover.

Many homeowners use their home equity to pay for college or pay off debts. It’s also common to use home equity to pay for home improvements — often increasing the home’s value, creating even more equity.

When You’re Ready To Refinance, Talk To A Professional
There are many options for homeowners looking to refinance. To get the most savings, talk to a Placement Specialist.

Placement Specialist work with many lenders — so they can compare rates and loan programs from several sources. They can help you make sense of your options and guide you through the loan process.

If you’re ready to refinance, talk to us NOW.