As a homeowner, there may come a time when refinancing your home is ideal. Refinancing allows you to pay off your existing mortgage and then get a new one with new terms. This includes lower interest rates or a shorter loan period.
Did you know that each year homeowners are losing $13 billion by not refinancing their residential mortgages?
Refinancing your residential mortgage isn’t a decision to make lightly. Keep reading to learn the best times to refinance.
Residential Mortgage: Low Refinance Rates
One of the top reasons to consider refinancing a mortgage is to lower your monthly payment. The loan’s interest rate is a huge factor in determining what you pay each month.
If today’s interest rates are at least a percentage lower than your current interest rate, it makes sense to refinance.
You’ll also want to consider the costs of refinancing. When you refinance, you’ll need to consider:
- Points paid
- Loan origination costs
- Appraised value of the home
- Monthly PMI payment
To determine if refinancing makes sense financially, try a break-even calculator
Switching Loan Types
When buying homes, most people choose a fixed-rate mortgage or an adjustable-rate mortgage (ARM).
Is your existing loan an ARM? Do you want more stability with your monthly payments? If so, switching loan types is a good reason to refinance.
On the flip side, if you’ve found an ARM mortgage with lower interest rates compared to a conventional loan, now may be the time to switch.
Finding the best loan type saves you the money spent towards interest. A lower rate also means a lower monthly payment.
Quicker Payoff
A new mortgage not only offers a new interest rate, but the new loan can also be set for a shorter term.
Many homeowners opt for a 30-year residential mortgage. The longer the length of the loan, the lower the payments, but you will pay much more interest over the life of the loan.
If you’re able to handle a higher mortgage payment, refinancing to a 20 or 15-year mortgage makes sense. Shorter term mortgages often offer lower interest rates.
You can also rest assured knowing that you’re paying less towards interest costs.
Use Your Home’s Equity
Is your home worth more than what you owe on the mortgage loan? Do you want to make improvements to your home?
If so, you can refinance the loan at a higher amount. When your loan amount is higher than what you owe, you’ll receive cash at closing.
Refinancing to use your home’s equity is most beneficial for home improvements. Updating your kitchen or finishing the basement will increase the value of your home, while paying for the improvements is rolled into your monthly mortgage payment.
Let Us Help With Refinancing Your Residential Mortgage
Once you’ve decided that refinancing your home mortgage is the best option, you’ll want to find a company you can rely on. At 7th Level Mortgage, we have the expertise you need to help you make wise refinancing decisions.
Our team provides a variety of services, including fast refi quotes, loan documentation, and FAQs.
Contact us today to speak to a loan consultant.