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What is the best time to refinance your mortgage?

Applying for a mortgage refinance is beneficial to many homeowners that are seeking to lower their monthly mortgage payments or reduce the term on their loan. Regardless if this is your first refinance or you’re a seasoned pro, meeting with a knowledgeable loan originator can help you determine if a refinance loan is right for your current financial situation.

What to Expect When Refinancing Your Mortgage

There are many different loan types you can choose from when applying for a refinance. It is important to understand your options, so you can choose the best loan product for your unique financial situation. Here are some of the most common refinance loans and how they work.

  • Fixed Rate Mortgage

This is the most common style of loan where homeowners typically choose a 30-year fixed rate mortgage. The fixed rate locks in a fixed payment over the life of the loan and the 30-year term lowers the monthly payment. A fixed rate mortgage protects you from an increase in mortgage interest rates should market rates rise.

  • Adjustable Rate Mortgage

An adjustable rate mortgage is a home loan with an interest rate that can change. This means that payments can go up or down depending on the market rate. This option can sometimes be a beneficial way to pay off your mortgage at a faster rate.

  • 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.

  • Cash-Out Refinance

With a cash-out refinance you can take out the equity in your home and receive cash to pay off other debts or to finance a home improvement project.

In order to apply for a refinance, you must be a qualified borrower. Your loan originator will check that you have a steady income, good credit and enough equity in your home. However, if you do not meet these qualifications, there are still a few ways that you may still be eligible for a refinance.

First, Envoy will need to make sure that a refinance makes sense for you. Please contact one of Envoy’s loan originators to discuss your options for refinancing your home and what options work better for your specific financial needs.

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Get to know your loan originator

It is important to build a good relationship with your loan originator. Just explain your needs and your current financial situation to find out the different options that Envoy can offer you.

Ask about an FHA Streamline Refinance.

With this loan your loan originator usually is not required to verify income, run a credit check or schedule an appraisal. All you need is a great track record for paying your current mortgage on time.

Ask about a VA I RRRL Refinance.

If you are qualified for the VA loan, you may be able to use your entitlement to refinance into this Interest Rate Reduction Refinance Loan (IRRRL). This loan usually does not require a credit score or appraisal.

When to Refinance Your Home

It is not always a good time to refinance your home. There are times when a refinance may not make sense for your unique financial situation. Here are some of the most ideal situations for obtaining a refinance loan.

When rates reduce and you have a good credit score

An interest rate reduction is the main reason why many homeowners opt for a refinance. Just a short drop in interest rates could save you thousands of dollars annually. You will need to calculate your potential savings and consider how many years you plan to live in your current home for a mortgage refinance to be worthwhile. You can crunch the numbers with our free refinance calculator to see if applying for a rate reduction makes sense.

If you want to pay off your loan quicker with a shorter term

Even though opting for a shorter loan term may raise your monthly mortgage payments, crunch the numbers with your loan originator. You may end up paying less over the life of the loan.

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If you have enough equity in your home to remove mortgage insurance payments

Private Mortgage Insurance (PMI) is a mandatory cost for some homeowners who purchase their first mortgage without a 20% down payment. You can potentially remove the cost of PMI if you refinance when you officially have 20% equity in your home.

You need to pay off debts or finance a renovation with a cash-out refinance

Most homeowners use a cash-out refinance to consolidate or pay off debts, like credit cards, student loans or medical bills. You can also use the funds to finance a renovation. The cash you will receive will be the difference between what you still owe on the mortgage and the current equity you have in the home.

Here’s some handy tips for monitoring your credit health.

If you have exhausted your options and cannot apply for a mortgage refinance, there are a few tips for increasing the health of your credit.

Pay your bills on time

Making on time payments will allow your credit history to heal over time. Keep close track of your credit report to make sure there are no mistakes along the way and then reapply for a refinance after you reduce some of your debts.

Keep your credit utilization low

A great rule-of-thumb is to never spend more than 30% of your credit card limit. The more money you owe, the more it will negatively impact your credit score and debt-to-income ratio when applying for a refinance loan.

Consolidate your credit cards

You can transfer balances from higher interest rate cards to lower rate cards. This will save you money and you can pay them off faster.

Obtaining a mortgage refinance can save you thousands of dollars annually but may not always make sense for your unique financial situation. Crunch the numbers with your local Envoy loan originator to see if a refinance could benefit you.


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