Best-Kept Secrets When Refinancing Your Property
by Arina Smith Real Estate 27 October 2021
There are several reasons why people will choose to refinance their homes. When their interest rates drop down quite a bit, the individual may decide that they want to refinance in order to help get a better deal and stop seeing so much go to their interest. Some want to extend their loan payment for a few more years, which can help to lower their payment too.
For some, the idea of taking cash out on their home and using it for debts and other items makes the most sense. They do not plan to move anytime soon, so they want to take the time to refinance and use the equity in their home to their own advantage.
When you are looking at all of the options available for refinancing your home, you need to be ready to find all of the best-kept secrets to get the work done. Some of these great secrets that can make your life a little easier include.
Take a Shorter Term
For some borrowers, it makes sense to take out a shorter-term loan when it comes to purchasing a new home. Expanding out the loan term is not in the best interest of every borrower all the time.
If you have already spent seven years paying off a loan that is meant to last 30-years, does it make a lot of sense to have it go for more time and go back into a 30-year mortgage? If you are able to afford it, consider shortening the time to 20 or 15-years instead. With a lower interest rate, you may be able to get the payment to be similar to before and shave time off the loan.
Talk with your loan officer and see what they are able to do with you. They may have some advice based on the price of your home, the value, the interest rates, and more. You can then figure out whether it is a good idea to extend the loan or if you should go with a shorter loan term for the best results.
Lock in the Best Interest Rate
You will quickly find that there is a ton of variance that comes with the interest rates that you will pay. These change all the time, which means that you need to work with your refinance loan officer to determine the best option for your needs.
Many loan officers have a good idea of how the mortgage rates are going to behave in the short term. It is impossible for anyone to guess how they will do in the long term though. They can use this information to make sure that you are getting a great rate.
You should also shop around a bit to find the best rates for your loan. If you get two or three rates, you may find that it can save you a lot of money in the process. This will ensure that you will not have to pay too much for the refinance. Even though the refinance will hopefully save you money, you want to make sure you save as much money as possible.
Shop around and get the best rate based on what the bank can offer you and what you think is the best option. Each bank is going to be different in what they are able to provide, which is going to make a big difference in the final rate that you are able to get to.
Consider How Long You Plan to Stay in the Home
One thing that a mortgage refinancing company will ask you is how long you plan to stay in the home. This is an important question because it requires you to plan things out and can change the type of loan that you want to get.
If you know that you are going to get the house sold between five to ten years, then you should consider an adjustable-rate mortgage instead of the fixed rate. This will give you a really good and low rate to start and you will be able to sell it long before you need to worry about the higher rates.
On the other hand, if you plan to stay in the home for another 30 years, then a fixed rate is often a better option so you do not need to worry about a huge increase.
VA Cash-Out Refinance
The VA cash-out refinance program is a good option for someone who is eligible for a VA loan. With this kind of cash-out refinance, veterans are able to refinance either a VA loan or a conventional loan into one that has a lower rate while also getting cash from the equity in the home.
This allows the borrower to turn the equity that is already in their home into cash. This loan type is going to replace the existing mortgage with a larger one. The difference between the loan balance and the new mortgage will be cash that the homeowner can use for what they want.
There are new things that need to happen for this loan to get approved. These include:
- A credit score of 640 is required for many of these programs.
- You need to certify that you plan to occupy the property you are refinancing.
- You can finance all of the closing costs if you would like, as long as they meet the guidelines for the loan to value.
Make sure to research some of the different loan options to see if they are the right ones for you to have cash for some of the big debts or purchases that you need.
Choosing to Refinance Your Home
There are different reasons why you would want to consider refinancing your home. Each homeowner will have to decide when it is the best time for them to refinance and work through all of the different types of refinancing that are available. With these best-kept secrets above, you will be able to get the best rates.