5 tips to refinance

The Resolution you Should Keep. Refinance.

5 reasons to refinance

“Should I refinance my mortgage?”

This is one of the most common questions we help our clients answer. 

When you refinance your existing mortgage, you are essentially paying off the existing mortgage debt and replacing it with a new loan. Many of the same costs are involved in refinancing a loan as are in first−time financing.

There is an old adage in the mortgage business that states that if you can improve your interest rate by at least two percentage points, then it is a good time to refinance. While that may work as a general rule of thumb, the truth is that there are many reasons to refinance. Here are the top five we see.


1. Lower Interest Rate 

Securing a lower interest rate is one of the top reasons for refinancing. A lower rate can make a large different in your monthly payments, and save you money on the financing fees! 

 

2. Build Equity Faster 

If you’re in a position to make a higher monthly payment due to a salary increase or other good fortune, you may want to refinance from a 30-year loan to a short (15 or 20 year) term loan. Adjusting the term enables you to build equity faster and save a large amount of money on the interest paid over time! 

 

3. Change your Loan Program 

Some homeowners who start in an ARM (Adjustable Rate Mortgage) discover they’d rather switch to a more stable Fixed Rate mortgage. While an ARM may have been the more attractive loan program when you first purchased, we can compare different Fixed Rate programs to find which would save you more money. 

 

4. Credit Score Improvement 

If you’ve increased your credit score since you first applied, you may be in position to refinance with a lower rate with your higher score! We’ll evaluate your current loan, then compare the rates with your new score to find you the best program that’ll lower your monthly payments! 

 

5. Getting Cash Out 

With a Cash Out Refi you’re able to tap into the equity that you’ve built in your home. You may want to put money towards home improvements, send a child to school, or pay off other debt with the equity you’ve accrued through your mortgage.  

 

Before you decide to refinance, think back to when you purchased your home.

  • Did you pay points to get a lower rate?
  • Has it been long enough that you’ve made your money back?
  • Is there a pre-payment penalty on your loan?
  • What is the purpose of this refinance? 

Refinances EMPOWER you to change

the terms of your original mortgage!

All of these factors are important to consider when you’re weighing if you should refinance your home. Give us a call at 952-405-2090 to set up your FREE initial consultation. We can help you determine if now is the right time for you to refinance. 

Are you ready to resolve your refi questions?


Refinance: refinance

 verb

re·​fi·​nance | \ ˌrē-fə-ˈnan(t)s  , (ˌ)rē-ˈfī-ˌnan(t)s, ˌrē-(ˌ)fī-ˈnan(t)s \

refinanced; refinancing; refinances

Definition of refinance

to renew or reorganize the financing of something to provide for (an outstanding indebtedness) by making or obtaining another loan or a larger loan on fresh terms refinance a mortgage

Keeping your credit score STRONG!

Cards that offer miles, cashback, or some other perk aren’t offered to just anyone, but if your credit is good…

When they say “it ain’t over ’til it’s over” they must not have been talking about credit scores. Keeping your score high is just as important after you buy a home as it was before you closed escrow, so don’t go on autopilot or revert back to old habits.

According to RealtyTimes’ Jaymi Naciri, while you may have met the goal of homeownership, keeping your scores up can benefit you in several ways. For one, you can get more credit cards, including those cards offered by stores with 0 percent financing for things like furniture, appliances and outdoor fixtures with no interest for several months. But watch out. Once your happy no-interest period expires, your rate can skyrocket if you don’t pay the entire balance. Still, if you just want to buy a little time until a few more paychecks or commission checks roll in, it’s not a bad way to go, using their money instead of your own for a short time.

Cards that offer miles, cash back, or some other perk aren’t offered to just anyone, but if your credit is good, they may be knocking down your door. “If you keep your credit score high enough to snag one, you’ll love being able to rack up miles to use for travel or apply a cash back bonus to everyday expenses to keep costs down,” says Naciri.

And here is something you may have forgotten: many employers run your credit as part of the hiring process. Let your credit drop, and it could keep you from getting a new job.

On top of all this, you never know what’s going to happen to interest rates. Good credit means that when rates drop you can jump in a heartbeat if you want to refinance, sell or buy another home.

VA Loan Right for You?

Why should you use VA loan:
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The VA loan is hands down the best mortgage loan there is. Here are some reasons why.

First, VA guarantees the loan for 100% of the appraised value of the property (technically, the loan is for the Notice Of Value amount, which in most cases is the same thing). This guarantee means that the lender is willing to make the loan. The loan amount for 100% financing goes as high as the maximum amount in each county.

Veteran buyers can get a loan for more than the county maximum; they just have to pay 25% of the amount above the county maximum. In pricey California, for example, a veteran could buy a home for $800,000 with a $40,963 down—roughly 5%. Which brings me to the next reason to get a VA loan:

There is no mortgage insurance. A buyer with a 700 credit score will pay about $400 per month for mortgage insurance if he puts 3% down on a conventional loan.

The rates are slightly lower in some cases. Also, underwriting standards are easier. Where conventional loans use dent-to-income ratios to qualify, VA loans use “residual income.” This looks at how much money they actually have available each month after meeting normal expenses from their take-home pay. Conventional loans are typically capped at a 45% debt ratio (or thereabouts). VA loans can many times be approved above 50% depending on the overall strength of the borrower.

When rates drop, refinancing is easy. VA loans offer a “streamline” refinance option, called an Interest Rate Reduction Refinance Loan (IRRRL). This allows the veteran borrower to reduce his or her rate with no appraisal, and very little underwriting of income. The primary criterion for approval is that the borrower has an acceptable payment history and that they are improving their position.

If a veteran wants to refinance and get cash out of his or her equity, there is no pricing adjustment for that process. A conventional loan will typically be about .25% higher in rate to get cash out.

For anyone who is a qualifying veteran, NOT getting a VA loan would be a costly mistake.

Hope this helps!