Refinancing Equity Loans
REFINANCING your loan allows you to take advantage of improvements in your credit or drops in market interest rates. Finding out if now is a good time to refinance is free. A popular option when refinancing is what is called a "cash out refinance." When you do your refinance you can make a small increase in your loan amount and get the money out as cash. Another benefit of refinancing is consolidating other high interest debts into your new home loan to save on interest expenses. Many homeowners with 15 year loans decide to refinance to a longer loan term of 30 or 45 years to lower their monthly payments.
The advantage of consolidating your debts into your home mortgage with a refinance is that your interest payments may not only be lower, they are also tax deductible. If you are on an adjustable rate mortgage, refinancing is also an opportunity to lock in at today's rates on a fixed rate mortgage.
Refinancing Related Questions
The lender who contacts you will likely ask you all of the following questions. More than the amount of the rate deduction must be considered when deciding whether or not now is the time for you to refinance.These questions include:
- 1. How long do you plan to stay in the home?
- 2. Do you have cash available for fees?
- 3. Is the value of your home going up or down?
- 4. Would you like to take cash out using the equity in your home?
Perhaps the most important question is how long you plan to stay in your current home. If you are staying more than three years and can obtain a rate reduction of more than 1.5% it is most likely in your best interest to refinance at today's rates.
Common Refinancing Questions:
- 1. Does Refinancing eliminate my my required mortgage insurance
- 2. I refinanced recently, should I do it again?
- 3. How do I know if refinancing will pay off?
- 4. Will an FHA Loan cover my closing costs?
If your home loan-to-value (LTV) is less than 80% then you may qualify to get your mortgage insurance such as PMI (Private Mortgage Insurance) eliminated, saving you upwards of $1,000 yearly. LTV is calculated as mortgage balance divided by home value.
Improvements in your credit as a homeowner who makes consistent payments may help you to get an even better rate. Additionally you may use the refinance as a opportunity to get cash out to make home improvements or send your kids to college.
This site features a free refinancing calculator. Based upon your predicted rate drop and closing fees, the calculator will generate a refinance break even date. If you plan to remain in your home until the break even date, refinancing is probably in your best interest.
In some cases yes, the closing costs can be rolled into the home loan if you cannot come up with the cash to cover closing cost expenses.