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How to Refinance Your Mortgage

refinance your mortgage

refinance your mortgage

Are you wondering how you can refinance your mortgage?

From lowering your monthly payment to changing the interest rate structure, there are many reasons why you might want to refinance a home loan. When done right, it can certainly be a smart financial move.

Let’s get started!

What is mortgage refinance?

When you refinance your mortgage, this means that you get a new mortgage to replace your current one. It allows you to change the terms of the loan, including the interest rate and monthly payment. A popular type of refinance is known as a cash-out refinance, which you can use to get some cash in exchange of your home equity.

Benefits of mortgage refinancing

Reduce monthly payment

One of the more obvious benefits of refinancing a mortgage is the ability to reduce your monthly payments. You can do this by either securing a lower interest rate or extending your loan term. This is a great solution if you are experiencing some difficulty making the monthly payments.

Pay off your loan faster

On the other hand, if your finances have recently improved and you can afford to pay more per month, it’s a good idea to shorten your loan term. Changing from a 30-year to 15-year plan will help you save on interest in the long run and pay off the mortgage faster.

Remove mortgage insurance

Another reason to refinance your home loan is to remove the mortgage insurance premium, especially if you had to pay it because you made a small down payment. So, if you now own more than 20% of your home equity, it’s possible to refinance into a new mortgage without the insurance. But if you have an FHA loan, the only way to eliminate MIP is to change to a non- FHA loan.

Tap your equity

Lastly, a cash-out refinance is a way to refinance your loan while taking out some cash from your home equity. Make sure that you own at least 20% of the equity! This type of refinancing can be useful if you have other projects you need to fund or other financial goals to achieve. It’s a little bit like getting a low-interest loan.

How to refinance your mortgage

Risks of mortgage refinancing

Unfortunately, refinancing your mortgage does not come without risks. But these shouldn’t put you off—they simply mean that you have to be careful and think carefully before making any big financial decision.

The most important disadvantage is that refinancing may cost you some money which include everything from appraisal and title insurance to the origination fee. Moreover, some lenders may even charge a prepayment penalty for paying off your loan earlier. So, if this is what you want to do, make sure the penalty doesn’t exceed the amount of interest you can save by shortening the loan length.

Should you refinance your mortgage?

All in all, if you have considered the above risks before refinancing, it may be a good idea torefinance. Especially if you are looking to change the terms of your loan! With that said, we wish you the best of luck in your refinance journey.

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