There’s a lot of buzz about refinancing in the news lately, what with lower interest rates and a relatively stable housing market. Homeowners may be wondering if it’s an opportunity to pursue or to swat away, so let’s look at the whys and hows of refinancing your mortgage.
Refinancing requires replacing your current mortgage with a new loan, meaning the process is similar to what you went through to purchase your home originally. There are typically four main reasons to refinance that include:
The most popular current option for refinancing is to take cash out of the home’s equity. When the value of the property has increased and/or the rates have dropped, homeowners can take the difference between the new loan and the home’s appraised value as “cash out.” The benefits vary from borrower to borrower, but it’s often an excellent way to consolidate debt or re-invest into the home by remodeling or improving its value. The proceeds are tax-free which adds to the appeal of this option.
LOWER MONTHLY PAYMENT
If the current interest rates are lower than when the home was first purchased, then refinancing can reduce the monthly payment, freeing up more income for savings or other needs. In addition, refinancing can eliminate mortgage insurance that may have been required on the original loan, putting even more money in your pocket each month.
REDUCE THE RATE
Adjustable rate mortgages mean monthly payments can go up or down, depending on interest rates. Homeowners who seek the security of a fixed rate may want to refinance with that objective in mind. Even if the difference isn’t significantly noticeable, the long-term peace of mind is.
Another long-view advantage of refinancing is to shorten the term of the loan from a 30-year to a 25, 20 or 15-year mortgage. While the monthly payment will probably be higher, you’ll garner a better interest rate, resulting in more equity in the home and a bigger reduction of the overall life of the debt. This ultimately puts you on track to pay off the mortgage while still owning your home!
If any of those “whys” speak to you, then it’s time to explore the “how.” Need help navigating?
Contact EnTrust Funding today!
Just as when you originally purchased your home, a lender will look at several factors for approval. Refinancing can often be a smoother process, but your credit score will still be considered, as well as your debt-to-income ratio (DTI). Depending on the lender and the type of loan, a DTI of 50% or lower is ideal. This means that your monthly income should be at least double your monthly debts, including mortgage payment. EnTrust Funding can work with homeowners with as low as 500 FICO score.
Having an idea of your home’s worth before starting the process will give you the confidence to proceed. If neighborhood values have increased and you’ve been steadily building equity in your home, then refinancing could be an easy decision. Most lenders require at least one year in the home before refinancing an existing mortgage.
With the housing market and interest rates in constant motion, it’s a good idea to look at your personal finances and needs. At EnTrust Funding (ETF), we have a team of lending experts and a variety of programs for all types of homeowners. With a simple conversation we can help you determine the why and how of your refinancing opportunities. Give ETF a call today for all the answers.
NMLS#1604483 – NMLS Consumer Access Site | © 2019 EnTrust Funding, LLC. All Rights Reserved.
State Licenses: ARIZONA – Licensed as a Mortgage Banker by the Arizona Department of Financial Institutions No. 0944083; CALIFORNIA – Licensed by the Department of Business Oversight under California Finance Lender Law No. 60DBO69722 & License by the Bureau of Real Estate License #02034996; COLORADO – Mortgage Company Registration – Regulated by the Division of Real Estate www.dora.state.co.us/real-estate; DISTRICT OF COLUMBIA – Mortgage Lender License No. MLB1604483; FLORIDA – Licensed as a Mortgage Lender by the Office of Financial Regulation No. MLD1543; GEORGIA – Georgia Residential Mortgage Licensee – Licensed as a Mortgage Lender by the Department of Banking and Finance No. 59465; INDIANA – Licensed by the Department of Financial Institutions Mortgage Lending License No. 40326; LOUISIANA – Residential Mortgage Lending License; MARYLAND – Licensed as a Mortgage Lender by the Commissioner of Financial Regulation No. 22908; MICHIGAN – 1st Mortgage Broker/Lender License No. FL0021225 & 2nd Mortgage Broker/Lender License No. SR0021244; NEW JERSEY – Titan Mutual Lending Inc., 250 Commerce, Suite 220, Irvine, CA 92602 – Licensed by the NJ Department of Banking and Insurance; NORTH CAROLINA – Licensed as a Mortgage Lender by the Commissioner of Banks No. L-182713; OHIO – Mortgage Broker Act Mortgage Banker Exemption SM.502071.000; OREGON – Titan Mutual Lending Inc., License No. ML-5626; PENNSYLVANIA – Licensed Mortgage Lender No. 68373; TENNESSEE – Mortgage License No. 164201; TEXAS – CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A MORTGAGE BANKER OR A LICENSED MORTGAGE BANKER RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550. THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.; VIRGINIA – Licensed as a Mortgage Lender and Broker by the Virginia State Corporation Commission No. / NMLS: MC-6794 (www.nmlsconsumeraccess.org); WASHINGTON – Licensed by the Department of Financial Institutions under the Consumer Loan Act No. CL-1604483; WISCONSIN – Mortgage Banker License No. 1604483BA & Mortgage Broker License No. 1604483BR