When interest rates are favorable, homeowners start to consider their refinancing options. Many homeowners know that refinancing can reduce their monthly mortgage payment, but there many reasons why refinancing might be beneficial for someone. Anyone interested in refinancing should approach the process with caution as it could end up costing you more money than you save. At Troy Mannella – LNM Lending Team of Security National Mortgage Company, we will guide you through the process and take the guesswork out of refinancing so that you know you have made the right choice.
Refinancing can allow a homeowner to:
- Obtain a better interest rate to lower monthly payments
- Decrease their loan term
- Reduce monthly payments in exchange for an extended loan term
- Consolidate various debts into a single loan
- Switch from a variable-rate to a fixed-rate
- Take advantage of home equity to acquire cash
Homeowners throughout Austin, Round Rock, Hutto, and Leander who plan to stay in their current homes for the foreseeable future are ideal candidates for conventional refinancing. There is an old rule of thumb that states, if you can improve your interest rate by at least 1%, refinancing will be beneficial. Closing costs are paid when refinancing, just as you did when you first purchased your home. These costs can be significant and are often a deciding factor when refinancing. If you plan to stay in your current home for a while, the long-term savings should outweigh your closing costs. Of course, everyone’s unique situation should be reviewed to ensure this holds true.
Another thing to consider is how many payments are left on your current mortgage. For many homeowners, it is very important to not have a mortgage payment after retirement. Refinancing one 30-year conventional mortgage into another 30-year mortgage will lower your monthly payment, but it could also mean making mortgage payments for many more years.
Cash-out refinancing can be useful for homeowners who need cash for things such as home improvements or to pay off high-interest debt. With a cash-out refinance, you are essentially replacing your mortgage with one of a higher amount. You will receive the difference between the new and old mortgage in cash. While you end up owing more, home improvements can increase the value of your home and paying off high-interest debt can save a significant amount of money over time.
First-time homebuyers often take advantage of government loan programs such as FHA loans due to their ease of qualification and low down payment requirements. The trade-off is often a higher interest rate than conventional options. If a homeowner’s financial situation improves over time, refinancing their FHA loan into a conventional loan can offer substantial savings.
Troy Mannella – LNM Lending Team of Security National Mortgage Company in a variety of Texas refinance loans throughout Austin, Round Rock, Hutto, and Leander. Whether you need cash for a remodeling project, or just want to take advantage of lower interest rates to lower your monthly mortgage payment, we are here to help. To learn more about your refinancing options, contact us today.