There are a lot of lingering questions about mortgage refinance. Since refinance helps you lower your monthly payment and interest rates a lot of people believe there is some sort of catch to it. There is no catch to mortgage refinance, it's just good business. So what are you waiting for?

Frequently Asked Questions about Mortgage

Here are the answers to some of the most commonly asked questions about mortgage refinancing.

What is mortgage refinancing?

Mortgage refinancing involves taking out a new mortgage to pay off your present mortgage. Mortgage refinancing is usually optimal when interest rates are low.

Is now a good time for mortgage refinancing since interest rates are low?

A good rule of thumb is that anytime current market interest rates are % to 5/8% lower than the interest rates on your mortgage, refinancing is a good idea. With interest rates low, you can lock in a low fixed rate for the life of your mortgage to avoid fluctuations and keep your monthly payments consistent. If you think interest rates are on the rise, locking in a low fixed rate is especially important.

Is mortgage refinancing right for me?

If you do not plan on moving within the next few years, do not have a significant prepayment penalty on your present mortgage, and will not lose anything significant on tax savings, then mortgage refinancing might make sense for you. Consider the fees you will have to pay to take out a new mortgage and also consider the total cost of borrowing, best represented by the APR.

What can mortgage refinancing do for me?

The benefits of mortgage refinancing include:

  • Reducing monthly payments
  • Locking in a low, fixed rate
  • Ability to improve features of your current ARM
  • Build home equity quickly
  • Option to switch to an ARM or a fixed rate, depending on your needs
  • Get cash for major expenses from your home equity

What's the difference between rate-term mortgage refinancing and cash-out refinancing

Rate-term mortgage refinancing is a loan for the exact amount needed to pay off your current mortgage. The purpose of rate-term refinancing could be to lower your interest rates, reduce monthly payments, or change the terms of your loan. Cash-out mortgage refinancing is a loan for more than your existing mortgage balance. The difference in the amounts is given to you in cash upon closing of the loan. You can use this cash for major expenses.

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Mortgage Refinancing