How Refinancing Works: Know Your Options
Reasons to Refinance
A refinance can be a great financial decision if you understand the full benefits and your financial expectations, especially if interest rates are trending downward. Here are a few reasons to consider a refinance:
- Lower monthly mortgage payment
- Receive a lower interest rate
- Pay off your home loan faster
- Avoid paying Private Mortgage Insurance (PMI)
- Switch to a fixed-rate mortgage
- Get cash to pay off other debts
Refinancing Options You Can Benefit From
Opting for a refinance means that you wish to pay off your current mortgage loan with a new mortgage loan. Since you already have a loan, a refinance will typically require less paperwork and will close faster than a purchase transaction. Here are two types of refinance choices and their benefits:
1. Rate and Term Refinance
If the current mortgage market is offering competitive rates and your budget could benefit in the long run from a shorter or longer loan term or a lower monthly mortgage payment, this is the option for you. With this option you can switch your 30-year mortgage term to a 15-year mortgage term or opt for a lower interest rate.
2. Cash Out Refinance
Choose this refinance option if you need to increase the amount you are currently borrowing. This mortgage loan pays you the difference between your loan balance and the current equity in the home. The extra cashflow can help fund many things, such as, a home renovation project, medical bills, a dream vacation or help repay credit card or student loan debt.
Your needs as a homeowner constantly change as different events happen in your life. Envoy Mortgage is here to help you determine if a refinance is the right choice for you.