When to Consider Refinancing

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There are many reasons homeowners may consider refinancing. You might wish to refinance because it will help you save money while also helping to reduce your monthly debt liability output. Additionally, refinancing could even shorten the term of the loan.

When refinancing consider these options:

Interest rate:  When you are considering refinancing your home, you will want to shop around for the lowest available interest where you don’t have to pay for any points. If you have to pay for the interest rate then it is not the lowest they have to offer you without an expense to you.

Eliminate PMI:  Consider making the switch from an FHA loan to a conventional loan in order to eliminate monthly PMI payments.

Term Length:  Maybe you currently have a 30yr mortgage term but you could get a lower rate at a new 30-year term.  You will not only save yourself interest over the life of the loan but you will possibly reduce the monthly payment as well. 

Fixed Rate: You currently have an adjustable ARM loan and rates are low enough to take advantage of a Fixed Rate mortgage.

Build Equity:  Sometimes you have the ability to build equity by simply refinancing - especially if you can get a high enough appraisal or an appraisal waiver that shows you have enough equity in the home from when you first purchased it.

Cash Out: A cash out refinance may be best for you if you want to consider tapping into some of your home’s equity to consolidate debt, complete home projects such as repairs/upgrades, and college tuition expenses for a child or spouse, or you just need some extra cash on hand.

What is the purpose of the refinance?

Setting a specific purpose for a refinance will help you stay focused and on track with the refinance process. It also helps your loan officer know exactly what you need most from this transaction.  If you are looking for a reduced rate but wish to keep the same term, then be that specific with your loan officer.  If you have some flexibility with the term also make that known. 

If you need cash on hand for college tuition payments, debt consolidation, or to make necessary upgrades and repairs to your home – a cash out option may be the best option for you.

The ultimate purpose of the refinance should fit your financial means and monthly payment budget without putting you into a financial hardship. That is why it is important to talk with your loan officer and go over everything in detail, and be sure to understand the new terms of the refinance.

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