Refinancing
Should I refinance? What are my options?
Owning a home comes with both benefits and with responsibilities. If you are considering refinancing, the Mortgage Hero team is happy to offer a free refinancing consultation. We will review the pro's and con's with you, as well as the costs and/or savings. We have helped clients save a lot of money, and also some that decided not to refinance after weighing the cost and instead opt for more short term solutions.
First, let's start with, "what is a refinance?" A refinance is the paying off of the current loan and establishing a new one. For example, let's say you have a current mortgage balance of $100,000 and want to take some equity out of the home to complete a remodel which costs $50,000. The current loan balance is paid off and additional $50,000, plus $5,000 in closing costs are addded on. This means the new mortgage will be for $155,000.
Now, I have to add this boring fine print for compliance reasons: This is not a commitment to lend. Restrictions apply, subject to credit approval, call for details, blah blah blah...
Good. Now that that is out of the way, let's move on.
It's important to know that, in Florida, a refinance is treated exactly like a purchase. Borrowers must qualify just as they would in a purchase. Lenders will review their Credit, Capacity, Capital, and Collateral. We offer numerous loan programs depending on your individual financial situation and needs.
While the reasons for refinancing vary, there are generally only two types of refinances: a rate and term reducation and a cash-out.
Rate & Term Reduction
Rate and/or Term reduction - this type of refinance is used to either reduce your interest rate, reduce your monthly payment, or reduce the amount of time it will take to pay off your home (the term). Lowering your rate AND term does not always mean a lower payment; often it's quite the opposite. However, the long-term savings can be SUBSTANTIAL!
Cash-out Refinance
Cashout Refinance - as the name implies, in this type of refinance you are withdrawing part of the equity in your home. It is important to note here that taking our equity from your home will likely increase what you currently owe on your home. This means your monthly payment will likely be higher. However, there are strategic ways you can leverage the equity in your home to your advantage! Here are just a few of the reasons you may want to consider a Cashout Refinance:
Consolidate Debt - Let's use a hypothetical example - Say that your monthly non-mortgage debt payments are $1,000 per month. Paying off those debts using the equity in your home would hypothetically raise your mortgage payment by $200. However, you would no longer have the $1,000 output every month, therefore saving you $750 per month in non-mortgage debt payments! This new cash flow could be used to pay down your mortgage faster, it can be used to invest in your retirement plan, or it could be used to build your rainy-day savings account. The ideas are limitless!!
Investment - many savvy investors use the equity in their properties to acquire more properties. You may not think you have enough experience or funds to become a real estate investor, but you would be suprised to learn how easy it is!
Home Improvements - need to repair your roof because insurance premiums have risen? Does your kitchen require a much-needed remodeling? Or maybe you can finally build that outdoor kitchen for entertaining guests! Using the equity in your home is an quick and easy way to finance a number of home improvement projects.
Whaever your needs are or motivationmay be, the Mortgage Heroes is always available to serve you and your family. Call us today and let answer your questions and let us know how we can help you.