Refinance and save money when you need it the most
Refinance and save money when you need it the most
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Use the cash to pay off your debts, make home improvements, or other expenses.
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Refinance and stop paying mortgage insurance or choose to pay a lower interest rate.
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Save half a point or more on your interest rate and enjoy zero lender fees
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Refinancing helps you cross things off your worry list
- Debt Consolidation
- Lower Monthly Payments
- Lower Interest Rate
- Pay Off Loan Faster
- Access Your Equity
- Renovate
- Eliminate Private Mortgage Insurance
Mortgage Refinancing Options
Although the main reason for refinancing a mortgage loan is to save money in some way, there are various approaches to take. Some result in an influx of cash that you can spend on whatever you need while others improve your monthly payment amounts to make the mortgage more affordable.
Cash-Out Refinance
If you want to refinance your mortgage to get an influx of cash based on home equity, then a cash-out refinance could work for you. Essentially, you replace your current home loan with a new loan that is larger than what it currently owed on the principal. The initial loan closes, and the difference between the old loan and the new loan is received as cash. A cash-out refinance is common for those planning to renovate their homes and need some funds to do so. This should only be done if you have the means to cover the higher loan payments that will likely result from a cash-out refinancing, though obtaining a better interest rate can mitigate this increase.
Cash-In Refinance
This type of mortgage refinance allows you to pay a lump sum of cash into the principal balance and acquire a loan with better terms while increasing equity in your home. This would be an option for homeowners who have some funds to work with and want to negotiate a better loan agreement. It could reduce your monthly mortgage payment or shorten the life of the loan if you wish.
Rate and Term Refinance
You may want to refinance your mortgage simply to take advantage of better refinance rates. Maybe the market is favorable and interest rates have lowered since you locked in a 30-year fixed-rate mortgage. The refinance process can result in a new loan that has a lower interest rate, reducing your monthly payment. You could also refinance to shorten the loan term. Perhaps you are hoping to pay off the home sooner because your income has grown. This loan program renegotiation will allow you to choose a shorter loan term, though your estimated monthly payment will increase unless you pay a lump sum into the principal balance.
Reverse Mortgage Refinance
This type of mortgage is technically a refinancing option, but it is only available to homeowners who are 62 and above and have built a lot of home equity. Essentially, you would no longer have to make monthly payments on the loan while you are living. Instead, you would receive cash based on the equity in your home. The remaining debt will be paid to the lender upon your death either through the sale of the home or payments from your heirs after a normal mortgage refinance.
Short Refinance to Lower Monthly Payment
If you are at risk of foreclosure, then you may want to consider a short refinance loan. This replaces your current loan balance with one that has a much lower balance, allowing you to have a lower mortgage payment each month. However, this refinancing process can hurt your credit score, so do so only when necessary to keep your home.
How to Know if Refinancing Your Mortgage is the Right Decision
There are a few circumstances when it makes sense to refinance your mortgage, many of which are listed above.
First, if you want to lower your monthly payment or reduce the life of the loan, then a term and rate refinance loan would make sense, resulting in monthly savings. Second, if you want to put down a significant lump sum of cash toward the principal for more home equity and change the terms of your loan, then you can refinance and get a lower loan amount.
Third, if you want to stop paying mortgage insurance premiums, you can refinance your existing mortgage when you reach an 80% loan-to-value benchmark. Since you have kept up with your monthly payments and built home equity, there is less risk to the current lender, so you can remove the mortgage insurance from your costs.
Additionally, there are streamline refinancing options for FHA loans, VA loans, and USDA loans where you can obtain a refinanced mortgage with better terms than your current mortgage.
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Frequently asked questions
Find simple and straightforward answers.
What are my estimated closing costs?
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If rates drop, how soon can I refinance?
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Is it a good time to purchase a home?
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Can I put $0 down?
It is possible to purchase a home with little or no money down, but it can be more difficult to qualify for a mortgage and the overall costs may be higher.
Some government-backed loan programs, such as FHA loans, VA loans, and USDA loans, allow for a low or zero down payment. These loans are typically available to first-time home buyers, veterans, and low-income borrowers.
However, it’s important to keep in mind that these loans may come with additional costs, such as mortgage insurance, which can add to the overall cost of the loan.
Is an FHA loan better than a conventional loan?
FHA loans and conventional loans are both options for purchasing a home, but they have some key differences that may make one a better choice for you than the other. Here are a few key points to consider when comparing the two:
Down payment: FHA loans typically require a down payment of 3.5% of the purchase price, while conventional loans may require a down payment of as little as 3% for first-time home buyers or 5% for other borrowers.
Credit score: FHA loans have more lenient credit score requirements than conventional loans. FHA loans typically require a minimum credit score of 580, while conventional loans typically require a minimum credit score of 620.
Income requirements: FHA loans have more lenient income requirements than conventional loans, which can make them a better option for borrowers with lower incomes.
Mortgage insurance: Both FHA and conventional loans require mortgage insurance, but the cost and duration of the mortgage insurance can be different. FHA loans require mortgage insurance for the life of the loan, while conventional loans require mortgage insurance only until you’ve built up 20% equity in your home.
Loan limits: FHA loans have loan limits, which may restrict the amount you can borrow. Conventional loans do not have loan limits, and this may allow you to borrow more.
Closing costs: FHA loans can have higher closing costs than conventional loans.
District Lending Can Help You Refinance
Whether you want to lower your monthly payment, eliminate mortgage insurance, take advantage of a better credit score for lower interest rates, switch to an adjustable-rate mortgage (ARM), acquire a new fixed-rate loan, reduce your loan term, or take advantage of your home’s equity, District Lending can help with refinancing your mortgage. Talk to your financial advisor or contact our team to discuss refinance rates and what mortgage loans would be right for your refinancing goals. See how cash-out refinancing, new mortgage terms, a lower interest payment, or a switch to fixed-rate or adjustable-rate mortgages can save you money through refinancing your mortgage.
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