Home Mortgage Refinancing
If you’re looking for a new mortgage to replace your existing home loan, that is called mortgage refinancing. The primary reasons for refinancing your mortgage are to lower your monthly payments and interest rate or to cash out some of your equity. Homeowners on a variable-rate mortgage may wish to refinance into a fixed-rate home loan.
Benefits of Home Refinancing
- Lower your monthly payment. If you’re having trouble affording your current mortgage payment, a refinance could help by increasing the loan term and/or lowering the interest rate.
- Change your interest rate. This could simply mean refinancing into a lower fixed rate, if rates have gone down since you bought the house. It could also mean switching from a variable to a fixed rate, or vice versa, for the purpose of a better deal or lower payments.
- Get cash out for a big expense. If you’ve accumulated a lot of equity (the difference between your mortgage balance and the home’s current market value) over the years, you may want to use it to pay for home renovations, a child’s college education, or other large expense.
- Pay off higher-interest debt. Some mortgage refinances are done solely to pay off the homeowner’s credit card and other high-interest debt. In that case, your debt is converted to a lower interest rate and you can make one convenient mortgage payment a month instead of several.
When to Refinance your House
If you want to refinance a mortgage, your biggest consideration is to make sure it will save you money. First, check the terms of your current home loan to see if there is a prepayment penalty. Next, find out what the closing costs would be on your new loan. If you plan to stay in the house for the long-term after you refinance, want to renovate to increase the home’s value, or will save money with a cash-out refinance that allows you to borrow at a lower rate, a mortgage refinance may indeed be a good option for you. On the other hand, if refinancing your home loan may put you underwater on your home loan, you don’t have much equity accumulated yet, or you don’t plan to stay long-term, you may want to consider other options such as the USDA home loan program or a home equity loan or line of credit.
Learn more about Mortgage Refinancing from your Community Mortgage Lender
Since 1919, BTC Bank has provided personal customer service to local communities in Missouri and Iowa. We have a rich history of helping our customers with their home loan needs and we can help you, too. To learn more about refinancing a home loan, visit a BTC Bank branch near you or contact us today. Our friendly mortgage lenders are waiting to serve you at 22 convenient locations throughout Missouri and Iowa.
FAQs about Home Loan Refinancing
What happens when you refinance a mortgage?
You will go through the same process of applying for a new mortgage and closing on your home loan. The new mortgage will pay off the old one.
How soon can you refinance your mortgage?
The answer will depend on the type of home loan you have now. If you’re looking to do a cash-out refinance, you must have enough equity first.
Does mortgage refinance require appraisal?
There are exceptions, but most home loan refinances do require an appraisal of the home’s current value.