If you are having trouble making your mortgage payments each month, or you are ready for a shorter term for your mortgage, you may start to consider a Refinance Home Loan. Often times, it is a great way to save money, however, there are costs and benefits of a Refinance Home Loan, therefore, there are certain things that you need to take into consideration before you make such a big decision.
What Are You Hoping to Accomplish?
If you are hoping to erase your debt, refinancing your current mortgage will not help. Refinancing your mortgage only changes the terms of your mortgage, which can help. You can reduce the amount of interest that you are currently paying, or you can extend the length of the loan, reducing your monthly payments.
When is the Best Time to Refinance?
Just because a friend or family member just refinanced their mortgage, it does not mean that the time is right for you as well. Everyone’s situation is different. There are four situations where it is a good time to refinance.
1. Your credit score has gone up since you first applied for a mortgage.
Interest rates have gone down.
Your income has changed.
You have made the decision to stay in your home for a long time. This is important because you will pay closing costs after you refinance the loan, therefore, if you do not plan to spend much more time in your home, refinancing will not be worth it.
What Types of Refinancing Loans are Available?
There are two types of refinancing loans available, and each is taken out for a different reason.
2. Standard Refinancing: Standard refinancing replaces your current mortgage with a new lower rate mortgage.
Cash Out Refinancing: Cash out refinancing allows you to take out a new mortgage for a higher amount than your original loan. The difference is taken out in cash. This money can be used to pay down debt, make home improvements, or for any reason that you need some extra cash.
Cost of a Refinance Home Loan
It is important to understand that a refinance home loan comes with several costs. These include:
- Application fees
- Appraisal fee
- Origination fee
- Title search fee
- Inspection fee
- Closing costs
- Attorney and lender fees
If you are considering refinancing your mortgage, Village Mortgage can help.