Refinancing

When you refinance your mortgage, you pay off your existing mortgage and replace it with a new mortgage that typically has a lower interest rate, term period, or monthly payment.

If you have both a primary mortgage and a second mortgage, you could refinance both by paying them off and replacing them with one new mortgage.

You may also refinance a non-FHA loan with an FHA loan. But refinancing has costs, so it isn’t always right for everyone.

If you currently have an FHA-insured mortgage, you may be eligible for an FHA Streamline Refinance.

Here are some of the benefits of refinancing:

• Get a lower interest rate and make lower payments. A lower interest rate usually means you will make lower monthly mortgage payments. You may be able to get a lower rate because of changes in market conditions or because your credit score has improved.
• Change the mortgage length.
  – If you decrease the length of your mortgage—for example, if you go from a 30-year term to a 15-year term—you will usually have a higher monthly payment but a lower interest rate. You will likely pay off your mortgage sooner because you are paying more of the principal each month. The total amount of interest you pay throughout the shorter mortgage term will typically be less.
  – If you increase the length of your mortgage, you will likely have a lower monthly payment, but the total amount of interest you pay throughout the longer term will typically be more. Note: Mortgage interest, unlike credit card debt, is tax-deductible; consult a tax professional for more information.
• Build equity more quickly. With lower monthly payments, you may be able to make additional payments and build up equity in your home more quickly.
• Get cash from the equity in your home. If you refinance for an amount greater than what you owe on your home, you can receive the difference in a cash payment. You may use this cash for home improvements, which will increase the value of your home, or for other major expenses.
• Convert from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage. Interest rates for an ARM can increase or decrease, so monthly mortgage payments can also rise or fall. Because the variable ARM rate is unpredictable, many people are more comfortable switching to a Fixed-Rate Mortgage that has a steady interest rate and steady monthly payment.
• Get an ARM with better terms. You may be able to refinance your existing ARM by getting another one with terms that are more advantageous to you. For example, you may be able to get a new ARM with smaller interest rate adjustments or lower payment caps (the interest rate can’t exceed a certain amount), or the new ARM may start out at a lower interest rate.
• Refinancing costs may be included in the loan.

With interest rates at historic lows, now is a good time for every homeowner to consider and evaluate the option of refinancing. However, refinancing is typically a benefit only if you plan to stay in your home for a minimum of two to five years, in order to recover your refinancing costs.

Contact your Mortgage Loan Officer today to see if a mortgage refinance is the right solution for you. We take pride in delivering value and savings to home buyers across the United States.

It would be a pleasure to help.

Visit the Federal Reserve Board’s online publication, A Consumer’s Guide to Mortgage Refinancings, at http://www.federalreserve.gov/pubs/refinancings/default.htm.