Are you refinancing primarily to lower your rate and monthly payments? If so, applying for a low, fixed-rate loan could be a wise option for you. An ARM (Adjustable Rate Mortgage) or a fixed mortgage with a high rate are loan programs that you might want to refinance. Different than the ARM, your low fixed rate mortgage will stay at a certain low rate for the life of the mortgage loan, even as interest rates rise. If you are not expecting to move in the near future (about 5 years), a fixed-rate mortgage can especially be a wise option. However, an ARM with a low intitial payment may be a smarter way to lower your monthly payments if you expect to move in the next few years.
Are you hoping to cash out some of your equity in your refinance? Your home needs updating; your son has gone to college and needs tuition money; or you are taking your family on a cruise. In this case, you want to get a loan higher than the remaining balance on your present mortgage loan.With this goal, you'll want If you've had your current mortgage for quite a while and/or have a mortgage with a high interest rate, you may be able to do this without increasing your mortgage payment.
Maybe you want to pull out some equity in your home (cash out) to put toward other debt. If you have the home equity for it, paying off other debt with higher interest than the rate on your mortgage (for example: credit cards, home equity loans, or car loans) means you can possible save hundreds of dollars monthly.
Are you dreaming of paying off your loan faster, while beefing up your home equity more quickly? If this is your plan, the refinance loan can switch you to a mortgage loan program with a short, for example: a 15 year loan. The mortgage payments will likely be more than they were with the long-term mortgage loan, but in exchange, you will pay substantially less interest and will build up equity more quickly. Conversely, if your current longer term mortgage has a small balance remaining, and was closed a number of years ago, you may even be able to make the move without paying more each month.
To help you figure out your options and the multiple benefits in refinancing, contact your mortgage professional.
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