If you are looking to lower your monthly payments and interest rates or consolidate your mortgage debt, refinancing your home is the best option. Refinance loans are used after an increase in market value once a home is purchased.
Is refinancing right for you?
A change in mortgage rates and how long you plan to stay in your current home are the most important things to consider when deciding to refinance. Refinance loans are often used to transition from an adjustable rate mortgage to a fixed rate mortgage or lock in a lower interest rate for lower monthly payments. Typically, homeowners refinance if interest rates become at least two points lower than their existing rate. Refinance loans include upfront costs similar to those required for original mortgages, so if the home is sold in five years or less, you could lose out on any potential savings.
Refinance loans can reduce your overall financial benefit by restructuring your debt, which lowers your interest payments. Refinance loans offer:
- Adjusted payments to current market standards
- The option to extend or keep the same loan term
- Ability to transfer debt to mortgage loan
- Lower closing costs and interest expenses
Homeowners with at least 5% home equity built through a conventional loan or at least 2.5% built with an FHA loan are eligible for refinance loans. You must also be up to date with your current mortgage payments to qualify. If you do not have the required home equity, but are current on your mortgage payments for the last six months, you may be eligible to refinance through the federal government’s Home Affordable Refinance Program (HARP).