When is the right time to refinance?
RATE / TERM Refinance: This type of mortgage is where you refinance the remaining balance of your current mortgage into a better interest rate and/or term (length of the loan).
One of the guidelines used to determine if the refinance makes "financial sense" is comparing the savings per month (and over the term) vs. the costs to complete the transaction. An easy calculation to determine this is divide the total closing costs by the monthly payment savings amount. The "answer" will tell you the number of months it will take you to re-coup your costs. If that number is 36 months or less, then chances are you would benefit from a rate/term refinance
For Example: The total closing costs for your refinance were $2,200. And, by refinancing you saved $105 per month. $2,200 ÷ $105 = 20.95, which is the numbers of months it will take to re-coup your costs. Based on the 36 month guideline, you made the right move!
We know the numbers can be confusing. Our team of experts is here to help you when deciding what type of refinance is right for you!
CASH-OUT Refinance: Just as the title says, this loan involves using the equity in the home to draw more money than the current mortgage balance to pay down debt, finance home improvements, cover the cost of education, etc.
By "wrapping up" this money into one loan at today's low fixed rates, you can enjoy a lower monthly payment.
Many variables factor into whether a refinance "makes sense", but usually it come downs to "dollars and cents" when considering the benefit of refnancing your home.
Let's take a look at the two primary types of refinance loans:
Other types of refinance mortgages:
ARM Refinance - many people with adjustable rate mortgages (ARMs) refinance to "lock in" a fixed rate for the future.
PMI Reduction / Elmination - Some borrowers use a rate/term refinance to remove PMI from their current loan. They may have seen a rise in the value of their home or have reduced the principal balance enough where this type of refinance will create a monthly payment benefit.
Your Preferred Choice for your Home Refinance!