If you’re unhappy with your current mortgage, are interested in your options to take cash out, or are looking for a different solution including rate and/or terms, consider refinancing your mortgage.
What exactly does this mean and why should you refinance? Read on to learn more!
If you’d rather jump ahead and speak to an experienced advisor at GO Mortgage, then you can fill out this questionnaire.
Otherwise, let’s dive in.
By the time you’ve finished reading, you’ll feel confident using a refinance mortgage calculator and prepared to take the next step.Ready? Let’s GO refinance
What is a mortgage refinance?
A refinance on your mortgage is when you take out another mortgage to replace your current home mortgage, usually with a new interest rate and loan term.
Most home buyers will refinance their mortgage when they’re seeking to save money or better their financial position by turning their equity into cash for various needs.
Refinancing your mortgage can also help you lower interest rates, reduce loan terms, or even switch the interest rate on your mortgage to a fixed interest rate.
When buyers can get a fixed interest rate, they can protect themselves from negative changes in the market.
There are many ways in which you can refinance your mortgage—the most common being:
- Conventional refinance mortgage
- Cash-out refinance mortgage
What to consider when mortgage refinancing
There are a few factors you should consider if you want to refinance your mortgage.
Your current mortgage interest rate is one of the biggest factors.
If you can reduce your interest rate, then it may be a good idea to refinance your mortgage. Generally, if you’re going to refinance you want to secure a better mortgage than you had previously.
You’ll be able to save more if you’re able to reduce your interest rate, even if it’s only by a small percentage.
With some refinancing mortgages, like cash-out refinancing, you receive cash from your mortgage.
A cash-out refinance is when you replace your current mortgage with a larger mortgage, and you receive the difference in the amount of cash.
The amount of cash is determined by the difference between your available home equity and your home’s current value.
This is why your home equity is also another factor to consider when refinancing your mortgage. You want to make sure you have enough home equity to get the best refinance offers. You can typically take out up to 80% of your home’s equity.
You obtain equity commonly by making your monthly mortgage payments over an extended period of time and paying down your principal amount, however, you can also add equity by making upgrades to your home. At the time of purchase, putting down a larger down payment on your home allows you to start out with significant equity.
Alternatively, if you currently hold any of the below mortgage types, then you can still be approved for a refinance mortgage, despite your home equity:
- VA loan
- FHA loans
- USDA loan
- Fannie Mae loan
Your income and debt are also important to consider. If you’ve had any change to either, whether positive or negative, this could impact your approval when you refinance.
If you’ve gained more income and have paid off more of your debt, then chances are you’ll be offered better mortgage terms. If your income has decreased or if you’ve incurred more debt, then make sure your refinance offer won’t add to your financial stress.
Lastly, you should consider the closing costs. Just like any home mortgage, you will have to close on your refinance mortgage, which means paying a percentage of the loan amount at the end of the process.
As a rough example, if you receive a refinance mortgage for $200K, with a 3% closing cost, then you can expect to pay approximately $6K in closing costs.
You want to make sure you can not only afford your monthly mortgage payments following closing, but the closing cost itself, as well.
Using a refinance calculator with Go Mortgage
A mortgage refinance calculator can help you estimate these potential costs and savings to provide you with a direction.
Calculate your refinance savings by using the Go Mortgage refinance calculator.
First you’ll enter your current mortgage information:
- Enter your current mortgage loan terms. You want to enter your original loan terms.
- Enter how much you have left to pay on your mortgage. You want to be as precise as possible to get the most accurate result.
- Enter the interest rate on your current mortgage.
- Enter your original home mortgage amount.
Next, you’ll enter your ideal refinance mortgage:
- Enter the loan terms you’d like to receive.
- Enter what is left to pay on your current mortgage.
- Enter your ideal interest rate. You may want to consider a lower interest rate so that you can save on your monthly mortgage.
- Enter the amount of cash you’d like to receive.
The results you receive are an accurate analysis of what you can expect if you are to apply for a refinance mortgage with GO Mortgage.
If you’d like a different monthly lower payment, you can just readjust any of the previous input details.
If you’re happy with the results you see or want to learn more about our offerings, then get in touch with Go Mortgage today!
When is the best time for refinancing?
The best time to consider refinancing is when it makes sense for you. Generally, this means when interest rates are lower in the housing market than what you currently are paying. Or, when life’s needs prompt you to consider leveraging your home equity for accessing cash.
However, even if the interest rates are low, you should also think about your goals with refinancing and your home goals.
If you want to refinance to receive cash for a major expense, then refinancing may be an even better option than other lending offers such as personal loans.
Typically, home mortgages have a lower interest rate than other lending programs or credit cards. Thus, refinancing may also be a good move if you’re consolidating your debt and looking to save money on your mortgage, to be able to spend or invest in other areas.
Like any major financial adjustment, you should calculate the potential costs, benefits and savings.Reach out to GO Mortgage to start the process today.