When homeowners think of refinancing, many think the purpose is simply to reduce their monthly mortgage payment. There are in fact many different reasons why someone might want to refinance. It is important to be cautious when doing so because even if refinancing allows you to immediately reduce your monthly payments, it could end up costing you money in the long run. No matter what your reason for refinancing might be, at Hunter Creek Mortgage, Inc., we take the guesswork out of refinancing so that you know you have made the right decision.
Popular reasons for refinancing a mortgage:
- Obtain a better interest rate to either lower payments or reduce a loan term
- Reduce monthly payments in exchange for an extended loan term
- Consolidate debt into a single loan
- Switch from a variable-rate loan to a fixed-rate loan
- Take advantage of home equity to acquire cash
When interest rates start dropping in the market, people tend to start looking into their refinancing options. There is an old rule of thumb that says if you can decrease your interest rate by at least 1%, refinancing is probably a good idea. Remember that this is simply a rule of thumb. Each individual’s situation should be reviewed thoroughly to see if this holds true.
Homeowners throughout Boise, Meridian, and Caldwell who plan to stay in their homes for an extended period of time are ideal candidates for refinancing. Closing costs were paid when you first bought your home. These same closing costs will need to be paid when refinancing a mortgage as well. Closing costs can be a significant expense which can often be a deciding factor when refinancing. As an example, if closing costs are $5,000 and you save $200 a month by refinancing, it will take at least two years to recover those costs. If you save only $100 per month, that two years becomes four years.
You will also want to take into account how much is left on your current mortgage. For many homeowners, it is very important to not have a mortgage payment after retirement. Refinancing your current 30-year mortgage into another 30-year mortgage could mean many additional years of mortgage payments.
Streamline refinance programs valuable tools for those who currently have certain government-backed mortgages such as FHA or VA loans. Streamline refinances are simple, fast, and cost-effective. A homeowner can only take advantage of streamline refinancing if it will provide the borrower with a “net tangible benefit.” In other words, the refinance is only available if the borrower saves money. The uncertainty and doubt many face when refinancing is removed with these programs.
Those who have built sufficient equity in their homes can utilize cash-out refinance programs. Cash-out refinances allow you to refinance your mortgage balance into a new loan of a higher amount. The difference between the two is made available to the homeowner as a lump sum cash payment. Home equity loans are a similar type of product however these are additional loans on top of your existing mortgage whereas cash-out refinances are a true refinancing of your current mortgage.
Hunter Creek Mortgage, Inc. specializes in a variety of Idaho refinance loans throughout Boise, Meridian, and Caldwell. Whether you need cash to make repairs to your home, or just want to take advantage of lower interest rates, we are here to help. To learn more about your refinancing options, contact us today.