Is refinancing right for you?
There are a variety of reasons to refinance. Whatever your reason, we have the tools and information to help you determine if now is the right time to refinance and what option is best for you.
Reducing Your Total Interest Costs
Refinance your loan at a lower rate. You can reduce your total interest costs by refinancing at a lower rate. The amount by which you reduce your interest costs should be greater than the costs to refinance. Costs generally depend on the length of time you stay in your home.
Refinance your loan at a shorter term. Refinancing your loan at a shorter term will cause your monthly payment to increase, but will reduce your total interest costs in the end. This option may be best for you if you’ve lived in your home for several years and your income has recently increased.
Refinance with a new ARM mortgage. If you currently have an adjustable rate mortgages and your rate has adjusted higher, you can reduce your total interest cost by refinancing with a new ARM mortgage loan.
Lowering Your Monthly Payment
Refinance to extend the term of your loan. By extending the term of your loan, you can lower your monthly payment even if rates have remained unchanged. Keep in mind, however, that you will increase your total interest costs for your loan.
Refinance from a fixed rate loan to an ARM. Another way to lower your monthly payment is to switch from a fixed rate loan to an Adjustable Rate Mortgage (ARM). ARMs adjust each year based on a market rate index which means your monthly payments could increase to the amount of your previous loan if the market rates also increase. If you plan to stay in your home a long time, this option may cost you more over the life of the loan.
Reducing Your Risk
Refinance to a fixed rate loan. Adjustable Rate Mortgages (ARMs) are popular loans that provide lower interests and lower monthly payments compared to fixed rate loans. However, ARMs involve more risk since the interest rate typically rises each year, and there is no certain way to predict what your monthly payment will be. To reduce your risk, you can refinance your ARM loan to a fixed rate loan. You may pay a higher interest rate, and your monthly payment may increase, but you will reduce your risk.
You can compare the two types of loans using our ARM vs. Fixed Rate Mortgage Calculator.
Paying Off Your Loan Faster
Refinance your 30-year loan to a 15-year loan. By converting your 30-year loan to a 15-year loan, you can pay off your loan faster and reduce your total interest costs. However, you will pay a higher monthly payment. Depending on whether interest rates have fallen, and by how much, the increase in your monthly payment could be worthwhile.
Make extra payments each month or year on your current loan. If your loan does not carry a pre-payment penalty, you can increase your monthly payment or make an extra payment each year. The amount in excess of your monthly payment goes towards paying down the principal of your loan. If you make an extra payment every year on a 30-year loan, you will pay off your loan in approximately 18 years.
Cashing Out Your Equity
If you have equity in your home, you could refinance at the market value of your property to cash out your equity. Use the money to remodel your home, pay for your children’s college tuition, consolidate debt, or any other major expense.
Do you need more information? Contact your local office to speak with a loan representative about your refinancing needs.
