What are some good reasons to refinance?
- Lower your monthly payment
- Get a low fixed rate for the life of the loan
- Take cash out for home repairs or renovations
- Use your home equity to pay off consumer or student loan debt
- Use your home equity to purchase an investment home
What Is Refinancing?
Refinancing is the process of replacing an existing mortgage with a new loan. Typically, people refinance their mortgage in order to reduce their monthly payments, lower their interest rate, or change their loan program from an adjustable-rate mortgage to a fixed-rate mortgage. Additionally, some people need access to cash in order to fund home renovation projects or pay off various debts and will leverage the equity in their house to obtain a cash-out refinance.
Regardless of your goal, the actual process of refinancing works much in the same way as when you applied for your first mortgage: you’ll need to take the time to research your loan options, collect the right financial documents and submit a mortgage refinancing application before you can be approved.
Benefits of a Home Refinance
There are several reasons to refinance your mortgage. Some of the potential advantages include:
- Lowering your monthly payment. An average homeowner may save $160 or more per month with a refinance. With a lower monthly payment, you are free to put the savings toward other debts and other expenditures, or apply those savings towards your monthly mortgage payment and pay off your loan sooner.
- Remove private mortgage insurance (PMI). Some homeowners who have enough property appreciation or principal paid off will not be required to pay mortgage insurance which will reduce your total monthly payment.
- Reducing the length of your loan. For homeowners who took out a mortgage in the early stages of their career, a 30-year mortgage may have made the most financial sense. But for those who want to pay off their mortgage sooner, reducing the loan term can be an attractive option.
- Switching from an adjustable-rate mortgage to a fixed-rate loan. When you have an adjustable-rate mortgage, your payment can adjust up or down as interest rates change. Switching to a fixed-rate loan with reliable and stable monthly payments can give homeowners the security of knowing that their payments will never change.
- Consolidating your first mortgage and your home equity line of credit (HELOC). By rolling these into a single monthly payment, you can simplify your finances and focus on one debt. HELOCs often have adjustable rates, so refinancing into a fixed-rate loan could potentially save you money in the long run.
- Use the equity in your home to take out cash. With rising home values, you may have enough equity to take out a cash-out refinance. This money can be used to finance home improvements, pay off debts, or fund large purchases.
Is now a good time to refinance?
Each home loan scenario and each borrower’s situation is unique. The best way to answer that is to request a free, no-obligation, mortgage review with 1st Los Angeles Mortgage. We will review your existing mortgage and provide you with a detailed loan comparison based on current rates and programs that meet your needs.
Interest rates are at historical record lows and conforming loan limits have recently increased. Now is a great time to request your free mortgage review.