Refinancing Resources

A refinance mortgage is a loan secured by residential real estate that is used to pay off your existing mortgage and/or to access equity in your property.

The bottom line to refinancing is saving money, but there are a few ways to do that.

1. Reduce interest rate: If you are refinancing to get a lower interest rate on your mortgage the cost savings can be significant. However, to truly assess the savings impact you must consider not only the reduction in monthly payments but also if the savings generated by the lower interest rate is enough to cover the closing costs of the new loan as well as the difference between the time left on your existing loan vs. the new mortgage.
2. Reduce risk with fixed-rate loan: Adjustable Rate Mortgages (ARMs) usually have much lower interest rates initially than fixed rate mortgages. However, once the variable rates start, depending on the economic conditions, the payments may rise significantly. Some homeowners may prefer less risky loans, like ARMs that have consistent monthly payments for the duration of the loan. Choosing between a variable and fixed loan refinance is completely subjective and depends on the individual’s risk tolerance. If you are comfortable with variable payments, refinancing to an ARM mortgage may save you more money on monthly payments over a fixed rate.
3. Reduce mortgage terms: To save money by changing the length of your mortgage, you may have to take on higher payments, but in the long run, you will be paying less in interest. Compare the total interest costs for a fixed-rate loan of $200,000 at 6.0 percent for 30 years with a fixed-rate loan at 5.5 percent for 15 years.  A 30-year loan at six 6.0 percent will have a lower monthly payment of $1,199, but over the course of the loan, the borrower will pay $231,640 in interest. On the other hand, a 15-year loan at 5.5 percent will cost the borrower $1,634 monthly, but over the life of the loan the interest paid will only be $94,120. So, by paying $435 more each month, this borrower would save $137,520 in total interest over the life of the 15-year loan.
4. Cash-out refinancing: Need some money for a new bathroom or a kitchen remodel? What about for the kids’ tuition or an emergency or to pay off other debts? Cash-out refinancing can free up cash by borrowing against your equity (  i.e. the difference between your home value and the total amount of money owed on the home) in your home. Cash-out refinancing also means borrowing more than what you currently owe on your home. Taking cash out to consolidate your debts into your mortgage can help you pay off all those bills and pay less interest on them. One caveat: by doing this, you will be creating a longer term of payment, which typically leads to more interest being paid on your mortgage over time. Make sure to do the math before refinancing and find out if you feel comfortable with the savings.

• You have a mortgage with a rate above current market rates
• You have an adjustable rate and you want to reduce payment risk by fixing your rate for a longer period of time
• You have equity in your property and you need access to cash
• You want to improve cash flow by lowering payments

Closing costs can range from two percent to five percent of the mortgage balance. Most lenders allow you to roll these costs into your mortgage.

Cash-out refinance

Cash-out refinances are useful when you need to tap into your home’s equity to finance something else. Perhaps you’d like to remodel the kitchen and need a lump sum of money, or you’d like to pay off high-interest debt like credit cards. You can borrow money for these needs against the value of your home by refinancing. The drawback of a cash-out mortgage is the increase in the amount you’re borrowing. If you time things right, you can get a lower interest rate that could offset the higher loan amount, making your monthly payments about the same. Banks consider cash-out mortgages riskier and may require a higher credit score to qualify, or limit the cash-out amount to $250,000.

Cash-in refinance

A cash-in refinance it the opposite of a cash-out refinance, where a homeowner pays a lump sum towards their mortgage balance owed to the bank. A cash-in refinance may result in a shorter term, lower refinance mortgage rates or both. The most common reason for a cash-in refi is to get rid of the mandatory monthly private mortgage insurance (PMI) payments required because you paid less than a 20% down payment when you purchased the home. PMI will cost 0.5% to 1.0% of the loan amount, which can add up to hundreds of dollars per month. Pay down your mortgage to an 80% loan-to-value (LTV) ratio and you’ll save yourself the insurance cost.

Rate-and-term refinance

Rate-and-term refinances are popular because they allow you to change the interest rate and/or loan term. When interest rates fall, most refinances are rate-and-term refinances. A homeowner can refinance from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage, or lock in a lower interest rate. You can also cash out some of your equity, but usually not for more than $2,000. Closing costs in this type of mortgage can be added to the loan balance, so you save yourself from having to pay the costs out-of-pocket.

Whether an existing customer or a new one, we are happy to help you!  To start your refinancing process, go here.