For many buyers in a few different situations, refinancing a mortgage is a prudent move. The refinancing process, which involves replacing your existing mortgage with a new home loan, assists many with lowering their payments and interest rates or even changing their loan program – and can even help you build equity in your home in many cases.
At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer several home refinance options for those in need. What are some of the options out there in this realm, and why might you be in a position to consider them? This two-part blog will dig into these areas, plus look at a few basic advice areas we can provide you when it comes to making the right decisions and using the refinancing process properly.
As we noted above, mortgage refinancing is the process of replacing your existing mortgage loan with a new one, typically with more favorable terms in at least one area. You do not have to work with the same lender during a refinancing situation, and the process is generally quite a bit simpler to go through than the initial home mortgage application and assessment.
During mortgage refinancing, your old loan will be completely cleared from the books as you begin to make payments toward the new one. There are two broad categories of refinancing to consider:
- Rate-and-term refinancing: During this type, you do not change the principal balance of the loan in any way. Rather, areas like interest rate and repayment timeline can be amended to make the loan more beneficial.
- Cash-out refinancing: During these situations, your new principal balance will be higher than the old one – with you receiving the difference in the form of a lump sum cash payment. This cash can be used for a number of purposes, whether it’s paying down debt, remodeling the home or others.
Here are some of the primary reasons why many people choose to refinance their homes:
- Lowering costs: Refinancing can help lower either monthly payments, interest rates, or both.
- Term reduction: Refinancing can allow you to reduce your loan term through paying off the loan earlier.
- Equity: Through a cash-out refinance, you can capitalize on some of the equity you’ve built in your home and put that additional cash to good use.
- Rate change: Some homeowners want to switch from a more volatile adjustable rate to a fixed-rate mortgage, which refinancing allows. Fixed-rate mortgages are often the better option for those attempting several areas of long-term financial planning, as they allow for a firmer idea of what future housing expenses will look like.
For more on mortgage refinancing, or to learn about any of our mortgage loans or services, speak to the staff at Altius Mortgage today.