Is Home Refinancing Right for You?

Mortgage rates have been historically low since March 2020. As a result, many homeowners want to take advantage of potential savings on interest with a mortgage refinance. Whether that’s all that motivates you or you also want to reduce your monthly payments, turn equity into cash, and/or switch from an ARM loan to fixed-rate, home refinancing may be the right move for you. Keep reading to learn more about how refinance works and what to consider before applying.

What happens when you refinance a mortgage loan?

To refinance simply means to replace an existing debt with a new one, usually under different terms. So, refinancing your mortgage consists of applying for a new mortgage loan. You can potentially borrow more or less than your current balance, make the term shorter or longer, switch to a different type of mortgage loan, and/or lock in a lower interest rate.

What are the benefits of refinancing a mortgage?

While there are no guarantees, these are some of the primary advantages you could benefit from with a mortgage refinance:

• Lower monthly payment
• Use the equity in your home to finance renovations or pay off higher interest debt
• Reduce your loan term to pay the mortgage off faster
• Lock in a lower interest rate

Three most common types of home refinancing

Once you’ve identified what you’re hoping to gain from a refinance, take a look at the most popular types of home refinancing:

• Rate and term: Lower your interest rate for potential savings over the life of the loan.
• Cash-out: If you have enough equity in your home, you can convert it to cash for a variety of uses.
• Cash-in: Stuck paying private mortgage insurance? Bring money to the table to reach that 20 percent threshold and you can be released from the PMI obligation.

How much could you save by refinancing?

The answer to this question depends on your current mortgage terms and overall financial situation, as well as how long you plan to stay in your current home. Use our mortgage calculator to find out how much you could potentially save on your monthly mortgage payment as well as over the life of the loan.

Does refinancing make sense for you?

Finally, consider the closing costs that come with any new mortgage, including a refinance. These three questions can help you figure out if it’s worth it:

• How is your credit score? If it’s not good to very good, you won’t qualify for the lowest rates.
• Do you have a prepayment penalty? Check if your current mortgage loan comes with a fee for early payoff.
• When is your break even point? It usually takes a few years for your savings on interest to balance out the closing costs.

How does refinancing work?

If you’ve decided that home refinancing is right for you, here are the next steps you can expect your mortgage lender to take:

• Check your credit score and history
• Review the payment history on your current loan
• Verify your income and employment status
• Request additional documentation as needed
• Conduct a home appraisal

Contact our mortgage lenders today!

Meet our lenders to learn more about your refinancing options. When you choose us for your mortgage refinance, you can expect to work with dependable, local mortgage professionals. Our lenders will put their years of experience to work in order to assist you with your refinancing needs. Our intimate and extensive knowledge of Central Illinois and Metro East real estate is essential to finding a custom mortgage solution. Talk to one of our lenders today to find out if refinancing is right for you!