Would you like cash back to help send your kids to college, remodel your home, pay for a family vacation, lower your mortgage payments, or shorten your loan term? If so, you might want to consider refinancing. The professionals at Quantum Mortgage are there to help decide if refinancing is a good option for you.
What is refinancing?
The process of getting a new mortgage in an effort to reduce monthly payments, lower interest rates, take cash out of your home to make large purchases or changing mortgage companies is known as refinancing. So, in short, refinancing is replacing old debt obligations with a new debt obligation under different terms.
What are the advantages?
Reducing an interest rate is one of the main advantages of refinancing. A lower interest rate can have a significant effect on your monthly payments, and could potentially save you hundreds of dollars each year. Another advantage of refinancing is being able to obtain money for large purchases such as a new car or a family vacation or to reduce credit card debt. A lot of times, the value of a house will increase over time as you start to make home improvements and build on. This is a good source of extra income and can be put to good use for other things.
- Ways to Refinance
Refinance with a conventional loan: This is usually the most common and cheapest route for borrowers. As property values increase throughout most parts of the country, so does the amount of equity homeowners hold. The more equity you hold, the easier it is to refinance.
- Refinance with an FHA loan: You can refinance with this type of loan if you don’t have much equity in your home, or you have a lower credit score and more debt than lenders usually accept. This loan guarantees that private lenders will be repaid even if you default. You will pay for that guarantee upfront and in monthly mortgage insurance. Banks and mortgage companies can make loans that they wouldn’t normally offer at competitive interest rates with the government standing behind them. This can help cut your monthly payments by hundreds of dollars.
- Refinance with a VA loan: This is considered the best mortgage program around. You are eligible for this loan if you are a veteran or actively on duty in the National Guard or reserve units. These loans are also less risky for lenders because the Department of Veterans Affairs is standing behind them. Because of this, you can have a lower credit score and less home equity than you’d need for a conventional loan.
Is now the time to refinance?
- The best time to refinance your home may be now as interest rates are the lowest they’ve been in almost five decades. Before you decide to refinance make sure the time is right for you. Here are five things to consider before refinancing:
How many years do you have left on your existing loan?
- Do you plan to move out of your home soon?
- Take a look at the interest rates.
- Can you improve your credit score or DTI ratio?
- How much will it cost you to refinance?
- Those are some things you’ll want to consider before deciding to refinance, but here are some scenarios when you do not want to refinance:
You plan on selling your home soon.
- There are only a few years left on your existing loan.
- You need to improve your finances or credit.
When it comes down to it, you’ll want to refinance when you will receive a specific benefit. Work with Quantum Mortgage and we can take a look at your goals and identify exactly how you will benefit from refinancing. We have a calculator on our website that will help you determine if refinancing is a good option for you. It’s quick, easy, and secure. If you have any other questions we would be more than happy to help you answer them. Give us a call at 815-977-4464 or visit us online today.