Anyone with an existing mortgage naturally wonders about the possibility of refinancing. The decision to refinance a mortgage should be taken seriously and approached carefully. How can you know if refinancing is right for you?
Before considering a refinance, it is helpful to understand why types of refinancing are available to you. The two main types of mortgage refinancing are rate-and-term refinancing and cash-out refinancing. With rate-and-term, you save money by refinancing your remaining mortgage balance for a lower interest rate and affordable term. With cash-out financing, you take out a new mortgage for more than the amount you initially owed, using the difference to pay off existing debt. With cash-out financing, interest rates will usually be higher, since the Investor assumes a greater amount of risk.
Refinancing your mortgage may make sense if you are able to obtain a significantly lower interest rate, if you plan to change from an adjustable rate mortgage (ARM) to a fixed-rate mortgage, if your loan-to-value ratio is lower, if your creditworthiness has improved, or if interest rates are trending downwards. Alternately, refinancing may not be the best idea if you will be paying off your existing mortgage soon, if your property has increased in value since its last assessment, if you will only minimally improve your interest rate, and if there would be high fees associated with closing or prepayment. Make sure you keep in mind that mortgage closing costs can be thousands of dollars. Dividing your total closing costs by the amount of potential monthly savings can give you a good idea of whether the refinance is truly worth it. Also keep in mind the term of the loan – a refinance will most likely cost you more money in the long run if you start a new mortgage with a long 30-year term.
There is a lot that goes into refinancing a mortgage. Make sure you thoughtfully consider all the pros and cons before starting the refinancing process. Talking to your bank or Investor, as well as using tools like mortgage calculators can help you to determine whether mortgage refinancing is right for you.
Many people ask us, "Can I get Cash out refinance using the equity in my home" or "Mortgage loans using the equity in my home?" Come and see our qualified Tampa Private Investors for more information today! We are now serving Sarasota, Daytona, Hudson, and the surrounding Gainesville areas!