Refinancing

There are many reasons why you might want to refinance your current mortgage. Consider the following benefits to see whether it makes sense for you to refinance:

Lower your payments.

You may be able to lower your payments by replacing your existing mortgage with a new loan at a lower rate of interest.

Unlock the equity in your property.

Many properties have appreciated over the last several years. You may want to use the equity you’ve earned in your property to “cash out” money for other purposes such as credit card debt, student loans or car loans. Generally, interest rates are higher on loans secured by something other than real estate. In addition, interest paid on debt secured by your primary residence is tax-deductible. The combination of these two factors can help you significantly lower your payments on non-real estate-related. A new loan against your home can allow you to pay off your existing mortgage and take out additional money to pay off other debts.

Use the equity in your property to buy another.

The “cash out” you receive from a refinanced mortgage on your primary residence may be used as a down payment toward a vacation home or investment property. The interest rate you pay on a loan secured by your primary residence will be lower than the rate offered on a loan secured by a vacation or investment property. For this reason, it often makes sense to use the equity in your home to help with the purchase of another property, rather than taking out a larger loan against the new property.

Lock in Your Rate.

If the interest rate on your loan is currently adjustable, or will be soon, it may make sense to refinance in order to fix the rate of interest you’ll have for the remaining term of your mortgage. Borrowers who plan to remain in their property for some time, or who plan to rent the property in the future, may want to lock in their interest rate to be certain of their future monthly payments.

Pay off a Second Loan

If you made a down payment of less than 20% when you bought your home you probably you probably used both a first and second loan to finance your purchase. Your first loan likely covered 80% of your purchase price and the second loan covered whatever additional amount you needed to borrow after your down payment.

If you still have a second loan on your property you may be able to pay it off by refinancing both your loans and rolling them into a single, new first loan. This will be possible if the total outstanding balance for both your loans is equal to, or less than, 80% of the current value of your property. By combining your loans you may be able to reduce the overall payment. Second loans often have higher rates than first loans or adjustable rate. If the rate is higher, refinancing may lower your payment. If the rate is adjustable, refinancing will lock in the rate.

Many variables need to be considered when evaluating a refinance. I can help you evaluate different options to help you decide what will make the most sense given your situation and finances.