Home Loan Refinancing

Lower Your Rate or Get Cash Out

Refinancing your home is when you have a home and a mortgage, and you apply for another mortgage loan which is intended to replace the original one.

Many people get home equity loans, or second mortgages, to accomplish many of the same goals that can be reached by refinancing. However, there are additional benefits as well as downsides to refinancing as opposed to getting an equity loan.

Why do people refinance?

The number one reason people refinance their mortgage is to secure a lower interest rate. In recent years the United states has seen historically low interest rates, and it sparked a refinancing frenzy. Just about anyone who had a mortgage, even if only for a short time, saw huge savings by refinancing at a lower rate. Rates are starting to climb back to normal, but rates are still available which are far lower than you may currently pay.

Some of the other benefits of refinancing your mortgage are:

Switch from a variable rate to a fixed rate mortgage, or vice-versa

Lengthen your loan term and therefore have lower monthly payments

Get extra cash out to pay off debt or finance something you need

Switch from a Jumbo loan to a conventional mortgage, thereby saving on interest

Some of the downsides to refinancing your mortgage are:

Closing costs can be more expensive than with a home equity loan

If your current mortgage carries a prepayment penalty, you may end up paying a huge amount

Refinancing can take as long and can be as much of a hassle as when you got your original mortgage

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Home Buying Vocabulary

Federal National Mortgage Association (FNMA)

A company created by Congress that buys and sells residential mortgages including those insured by FHA or VA.

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Frequently Asked Question

Will refinancing enable me to terminate my PMI?

Answer:
You may be able to eliminate PMI by refinancing. If, by refinancing, you are able to have at least 20% equity in your home, and you have made your house payments on time for the last year or so.

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