How Do I Know When To Refinance My Mortgage?

If you have owned your home for a while, you may have already thought about refinancing your mortgage.

To put it simply, refinancing your mortgage means getting a new loan for your current home and paying off your first loan. Your new loan takes the place of the first one.

Refinancing could help you get a better rate, lower your payments, change the terms of your loan, pay it off faster, or pay off other debts.

Refinancing might be good if your finances have changed since you got your first home loan. Maybe your family makes more money now than when you bought the house, or maybe you make less money now and want to use the equity you’ve built up.

Many homeowners think that refinancing their mortgage is a good idea for the following reasons:

• Lower my rate of interest.
• Lower my mortgage payment every month.
• Cut down the length of my home loan to pay it off faster.
• My mortgage has terms that can be changed or updated.
• Change your mortgage from one with a variable rate to a fixed rate.
• Change my loan to one where I only pay the interest to lower my monthly payment.
• By refinancing, I can get cash from the value of my home.

Refinancing can help you set up a new loan that better fits your current financial situation and any new goals you may have.

Our Preferred Rate Loan Advisors can help you compare current rates to those on your current loan to see if it’s a good time to apply and start the refinancing process.

Set goals for your money

Most likely, refinancing your mortgage will change your short-term and long-term finances. Even if mortgage rates are going down, refinancing isn’t always the fastest way to get out of debt.

Setting some financial goals before refinancing your loan will help you get the most out of the process. You might want to lower your mortgage payment or make your loan last less time.

Maybe you’re ready for a higher mortgage payment to pay off your loan faster and pay less interest in the long run. You might want to use the equity in your home to get the cash that you can invest elsewhere or use to pay off other debts.

So, before you get too involved in all the different ways to refinance your mortgage, take some time to think about your financial goals and why it makes sense to do so.

For instance:

• Do I want my family to have more money each month?
• Do I want a lower monthly payment to put more money away for my kids’ college?
• Do I want to pay off my loan and mortgage faster by paying down the loan?
• Do I want to get my money out and put it somewhere else?
• Do I want to change my loan from an adjustable rate to one with a fixed rate?

If you want to refinance your mortgage, knowing the big picture of what you want will help you get through the process.

Talk to an expert about loans.

At first, refinancing might seem easy: call your broker to see if the rates are lower than they used to be.

When you start looking at all your options, it turns out that refinancing your mortgage can be a complicated process. The good news is that the money you make will be worth the work, and it could affect your finances for years to come.

A good loan consultant will:

• Spend some time looking at the bigger picture for you and your family.
• Help you through the whole thing.
• Lock in your rate and get you pre-approved.
• Handle the paperwork and make sure everything is in order.
• Describe any fees and commissions along the way, if there are any.
• Finalize the details and terms of your new mortgage loan for your home.
• Explain the terms of your new mortgage loan in plain English.
• Help you through the process of closing.
• When your new home loan closes, we’ll have a party with you!
• Preferred Rate has dozens of specialty loan programs and unique options, and our loan advisors are real experts when it comes to putting together the perfect mortgage.

Renewing a mortgage

Your loan advisor will look into the best ways to refinance your mortgage now that they have your information and know your financial goals.

Now is a great time to research and review the different kinds of mortgage loans. Your original loan may have been a good fit when you bought your first home, but your life may be very different now.

• A 30-year fixed-rate mortgage gives you a fixed monthly payment and a fixed rate for the life of the loan.
• A 15-year fixed-rate mortgage gives you long-term stability with a fixed rate and fixed monthly payment. Most of the time, the monthly payments are a bit higher, but you’ll pay off your mortgage faster.
• A mortgage with an adjustable rate (ARM) usually starts with a lower rate, has a lower monthly payment, and has flexible terms. After a set amount of time, usually between 2 and 5 years, the monthly payment and interest rate may change.
• After putting some money into your home, an interest-only mortgage is meant to be a short-term loan. If you only pay the interest on your loan each month and not the principal, your monthly payment will usually be lower, and your rate will be below.
• Homeowners who want to borrow against a high-value home worth more than the loan limits for a conforming loan can get a Jumbo loan. These loans can have a fixed interest rate or an interest rate that changes over time. Other options and loan products are only available to people who own homes with a high value.
• A USDA loan is another way to refinance a rural property, farmland, land that can be used creatively, and homes in rural areas.
• A reverse mortgage loan is a unique way to refinance for people who own their own homes and are at least 62 years old. Homeowners can choose to put off making their mortgage payments or get a monthly payment that they can use however they want.
• Preferred Rate also has dozens of specialty loan options and government-backed mortgage loans that can be combined with one of the popular mortgage loan types listed above to make a truly customized mortgage loan for you.

Lock in your rate of choice

You want to lock in your rate after giving all of your paperwork to your loan advisor. There could be many changes in the economy and the housing market. If you lock in a fast rate, your new rate won’t change even if rates go up. It also means that your “locked-in rate” can go down with the market if rates go down.

This is why Preferred Rate has a service called “Secure Lock.”

We want the whole process to be easy for you to understand and free of stress.

Once your rate is set and your loan officer has all the documents they need, you can take a deep breath.

Your loan advisor will put together a few loan options for you to look at while taking a break from the process and getting back to normal life.

When it comes to refinancing, you might want to think about your financial goals and look at what different loan packages offer. This will help you when it’s time to sign the papers for your new loan.

Get approved for your new loan.

This part is easy! Your loan consultant will tell you which mortgage loans are best for you based on your goals and information about how you qualify. You might be asked to verify paperwork, or you might need to give some extra information to finish the loan process.

Once the loan is approved, you and your Loan Advisor can go over all the new loan details. You’ll be able to ask questions and confirm any changes that happened to refinance your home loan.