734.506.6300The Refinancing Process
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Your Options
You and Your Home
Before refinancing, it’s important to understand your options and what will work best for you. Are you looking to lower your monthly payment or wanting to cash out on your equity?
Lower Your Payment
There are a few ways you can lower your monthly payment and save money each month.
Lowering your interest rate is one of the most common ways to lower your payment. If current rates are lower than when you first purchased your home, consult with your loan officer to see what rate you qualify for. A lower rate not only saves you money each month, but a lot on interest over a long period of time.
Another way to lower your monthly payment is by removing private mortgage insurance (PMI). PMI is on conventional loans usually when you put less than 20% down. PMI will stay on the loan until your loan-to-value (LTV) ratio is 80% and you request removal from your servicer, or when your LTV is 78% it will automatically drop off. Dropping PMI from your loan can save you a lot of money each month.
Depending on your loan, there could be other ways to lower your payment, such as changing your mortgage term. It’s important to check with your loan officer to see what can be done for you.
Cash Out Your Equity
To have equity is to have your home value worth more than what you owe on the property. Liquidating your equity and turning it into money in your pocket is a great way to have funds for projects around the home, pay off debt, or whatever you may need. Any money you receive is tax-free. When cashing out you don’t add a second lien to your home like you would with a home equity line of credit or home equity loan.
Shorten Your Term
If you’re looking to reduce the amount of interest you are paying each month, then shortening your mortgage term may be the right option for you. When you chose a lower mortgage term such as a 10 year or 15 year, you usually can receive a better rate than you would with a 30 year. So, with a better rate and shortened term, you will have a large amount of savings with interested saved over time.