How Many Types of Refinancing Are there?
There are a variety of reasons homeowners might want to refinance, including the chance at extracting equity from your home. Some people use this as an opportunity for cash out and start making investments elsewhere in order pay off other debts or fund repairs on their property; if that’s what you’re thinking about then be sure ask us first because it will likely qualify under some tax incentive programs!
Homeowners can choose whether they’d like their mortgage to shorten or lengthen. With shorter durations, the rate of interest paid decreases over time because there are less months for that loan’s duration–so in effect you’re paying back your home sooner than before!
You can save money on your mortgage by refinancing to get a lower interest rate. A 1-2% decline in rates would be worth tens or hundreds thousands dollars over 30 years
Another way homeowners can save money is to change the loan structure. Borrowers who are in an ARM (adjustable rate mortgage) have the option to refinance to a fixed-rate mortgage.
Homeowners can save money by removing Mortgage Insurance. Mortgage insurance is a type of coverage that protects lenders in case you default or refinance your loan and cannot make payments as agreed. There are two federal government backed programs- FHA (Federal Housing Administration) & USDA (United States Department Of Agriculture). These loans typically require ongoing premiums even after you build up equity. Many people who have improved credit profiles later shift into conventional loans. They are more secure options because the monthly costs no longer apply at 20% or more equity.
When does it make sense to refinance?
When you consider refinancing, remember that it depends on your goals and finances. For example: do I want a lower monthly payment? Am I trying to save in total interest paid or extract cash from my home with equity built up over time.
Should I Shop around for rates and lenders?
Mortgage brokers are available to help you find the best rate as they work with multiple lenders. And under normal circumstances, you may look at mortgage rate comparison sites to find the best rate. However, nowadays most people are reaching to out mortgage brokers (such as Handshake Home Loans Inc.) to help them achieve their refinance or purchase goals.