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Which refinancing option is best for you?
We'll work with you to qualify you for the best loan program to fit your specific financing needs. But there are some general considerations to keep in mind in advance. When it comes to refinancing there are four major types:
- Lower Rate and/or Payment
- Cash-Out or Debt Consolidation
- Lower Loan Term / Equity Builder
- Strategic Equity
Lower Interest Rate &/or Payments - Are you refinancing primarily to lower your rate and monthly payments? Then your best option might be a low fixed-rate loan.
Maybe you have a fixed-rate mortgage now with a higher rate, or maybe you have an ARM -- adjustable rate mortgage -- where the interest rate varies. Even if it's low now, unlike your ARM, when you qualify for a fixed-rate mortgage you lock that low rate in for the life of your loan. This is especially a good idea if you don't think you'll be moving within the next five years or so.
On the other hand, if you do see yourself moving within the next few years, an ARM with a low initial rate might be the best way to lower your monthly payment.
Cash-Out or Debt Consolidation - Are you refinancing primarily to cash out some home equity? Maybe you want to pay for home improvements, pay your child's college tuition bill, take your dream vacation, whatever. Then you'll want to qualify for a loan for more than the balance remaining on your current mortgage. If you've had your current mortgage for a number of years and/or have a mortgage whose interest rate is higher, you may be able to do this without increasing your monthly payment.
You want to cash out some equity to consolidate other debt? Good idea! If you have the equity in your home to make it work, paying off other debt with higher interest rates than the interest rate on your mortgage -- for example, credit cards, home equity loans, car loans, some student loans -- means you can save possibly hundreds of dollars a month.
Lower Term or Equity Builder - Do you want to build up home equity more quickly, and pay off your mortgage sooner? Consider refinancing with a shorter-term loan, such as a 15-year mortgage. Your payments will be higher than with a longer-term loan, but in exchange, you will pay substantially less interest and will build up equity more quickly. If you have had your current 30-year mortgage for a number of years and the loan balance is relatively low, you may be able to do this without increasing your monthly payment -- you may even be able to save!
Strategic Equity - Or you may decide to cash out some home equity and invest it into other low risk, high interest investments that can help you build wealth faster while possibly allowing you a higher tax shelter. To read more about how you can use your equity strategically click here.
Related Downloadable Resources:
 A Consumer's Guide to Mortgage Refinancing
The Simple Facts About Loans
Interest Only Payments and Payment Option ARMs, Are they Right for Me?
A Consumer's Guide to Adjustable Rate Mortgages
A Consumer's Guide to PMI - Private Mortgage Insurance
When Your Home is on the Line - Understanding Home Equity Lines of Credit
Click here to view more Downloadable Resources
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