Refinancing a mortgage means getting a new mortgage loan to pay off your original loan. Before starting the refinancing process, it’s essential to know when and why to refinance.
Why Should I Refinance My Mortgage?
Refinancing your mortgage lets you change the loan terms to secure a lower monthly payment, take some money from your home’s equity, or consolidate debt. Here, we’ll take a deep look at the reasons why you should refinance your mortgage.
You want to change your loan term.
You might want to change your loan terms for several reasons. If you’re finding it challenging to make monthly mortgage payments, a refinance can let you extend your mortgage term and reduce your monthly payments. You can also refinance from a longer to a shorter term to enjoy lower interest rates.
You want to make home renovation.
You need to make a home renovation at some point. Using your home equity can be better than getting a personal loan. You can complete your home repairs or improvement without excessive interest charges if you have sufficient equity in your home to do a cash-out refinance.
You need cash to pay off your debts.
You have home equity if you’ve made regular monthly payments on your mortgage. Home equity is the difference between the money you still owe your lender and your home’s market value. If your mortgage loan is over five years, you’ve built enough equity in your investment just by making your regular monthly payments. A cash-out refinance lets you take out a portion of your home equity.
You want to change from an adjustable-rate mortgage to fixed-rate mortgage.
An adjustable-rate mortgage offers most borrowers a lower interest rate at the start of the loan. But after some time, the interest rate can increase, which doesn’t favor most borrowers. You can opt to refinance your ARM into a fixed-rate mortgage, eliminating this interest rate fluctuation.
How Does Mortgage Refinancing Work?
This process is similar to getting a new mortgage loan. Start by searching around and comparing terms and interest rates with different mortgage lenders to get the best offer. You can be eligible for more favorable terms if your credit score has improved since you were approved for your first mortgage. Like getting a new mortgage, refinancing usually comes with closing fees that amount to 3%-6% of the loan value.
When Should I Refinance My Mortgage?
Your interest rate plays a significant role in the amount you end up paying. The perfect time to refinance your mortgage is when interest rates on home loans drop. While waiting for interest rates to drop is not the only time to refinance, you can also refinance your mortgage when you have a higher credit score than when you applied for a loan.
Contact Us For Mortgage Refinancing Chula Vista
At Dimitrije Isakovic Mortgage Group, we offer mortgage-refinancing programs for homeowners in Chula Vista. If you’re considering refinancing your mortgage in Chula Vista, call us at 760-716-4041 to schedule a personal consultation.