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Mortgage Refinancing

Have interest rates fallen? Or do you expect them to go up? Has your credit score improved enough so that you might be eligible for a lower-rate mortgage? Would you like to switch into a different type of mortgage?

The answers to these questions will influence your decision to refinance your mortgage. But before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be clear of the potential benefits to refinancing.

When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage, or take cash out from the equity built up in your home.

Why consider refinancing?

Lowering your interest rate
The interest rate on your mortgage is tied directly to how much you pay on your mortgage each month so a lower rates usually mean lower payments. You may be able to get a lower rate because of changes in the market conditions or because your credit score has improved. A lower interest rate also may allow you to build equity in your home more quickly.

Adjusting the length of your mortgage
Increase the term of your mortgage: You may want a mortgage with a longer term to reduce the amount that you pay each month. However, this will also increase the length of time you will make mortgage payments and the total amount that you end up paying toward interest.

Decrease the term of your mortgage: Shorter-term mortgages--for example, a 15-year mortgage instead of a 30-year mortgage--generally have lower interest rates. Plus, you pay off your mortgage sooner, further reducing your total interest costs. The trade-off is that your monthly payments usually are higher because you are paying more of the principal each month.

Changing from an adjustable-rate mortgage to a fixed-rate mortgage
If you have an adjustable-rate mortgage, or ARM, your monthly payments will change as the interest rate changes. With this kind of mortgage, your payments could increase or decrease.

You may find yourself uncomfortable with the prospect that your mortgage payments could go up. In this case, you may want to consider switching to a fixed-rate mortgage to give yourself some peace of mind by having a steady interest rate and monthly payment. You also might prefer a fixed-rate mortgage if you think interest rates will be increasing in the future.

Getting cash out from the equity built up in your home
Home equity is the dollar-value difference between the balance you owe on your mortgage and the value of your property. When you refinance for an amount greater than what you owe on your home, you can receive the difference in a cash payment (this is called a cash-out refinancing). You might choose to do this, for example, if you want to make home improvements, consolidate bills or pay for a child’s education.

What do I need to refinance?

  • A stable income
  • A good credit history
  • Documentation – verification of your income (W-2 forms, paystubs or tax returns if you are self-employed), and assets (such as bank statements to verify your savings).

Thompson Kane is in the business of saving our customers money on their home mortgages. With low rates and personalized loan options, you’ll be sure to get the mortgage to meet your home financing goals. Please apply online or contact us today to see if refinancing is right for you at (608) 833-2400.