Rather than blindly starting the refinance process, it's important to break down the different factors to truly see if a mortgage refinance is right for you.
Can I Lower My Interest Rates?
One of the common reasons to refinance a home is to obtain a lower interest rate. This is one of the easiest ways to save money on your monthly payments. When you initially purchased your home, you may have been stuck with higher interest due to your financial situation or the state of the market at the time of your original application. Lowering your interest rate by 2-3% can make an enormous difference in your monthly payments. As you browse through the best mortgage lenders, you have the ability to use online refinancing calculators to compare your potential monthly savings. Quite often, the reduced interest can result in thousands of dollars in savings each year.
Compare the Top Lenders
|Lender||Minimum Credit Score||Best Feature||Visit Site|
|620+ for more loans||Refinance loans approved in minutes||View Rates|
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|500+||The best deals possible on your mortgage||View Rates|
|580+||Online application available 24x7||View Rates|
|620+||Basic mortgage information is available without a signup||View Rates|
Can I Change My Loan Terms?
There are many types of mortgage terms that are available for initial loans. What worked for you in the beginning may not be the most viable option for your current situation. For example, you may have an adjusted rate mortgage (ARM), where the mortgage lender can change the interest rate annually. If you're currently on a tight budget, you have the option of establishing more consistent, affordable payments through refinancing. You may refinance to a 30-year fixed mortgage that will give you a stable interest rate and the same payment throughout the duration of the loan.
If your financial situation has drastically improved, you may want to refinance your home to a shorter mortgage term. A 15-year fixed rate mortgage can yield much lower interest rates and allow you to pay off your home quickly. A balloon payment mortgage features fixed payments for a set amount of years and then one large final payment at the end of the set term.
House Value & Equity
Typically, one of the first steps in refinancing your home is to receive an appraisal from a qualified refinancing lender. The current home value can have a major impact on the type of refinancing that you apply for. If your home value has increased, you may want to refinance in order to increase the home's equity. The equity amount represents the value of the home that you actually own. For example, if your home was valued at $200,000 and you already paid $50,000, you would have 25% equity on the property. If the home's value has increased to $250,000, your equity value would now equal $100,000 or 40%. After you refinance, the extra equity and value can be paid to you once the house is completely paid off.
If your home value has gone down, you may want to reconsider the refinancing process. You may not have as many benefits and could actually lose out on some of the equity that you currently have. This is why an appraisal can give you a clearer picture of the current market and your available options.
Closing Costs & Living in the Home
In the world of refinancing, it takes money to save money. If you are in a short-term living situation and plan on moving soon, now may not be the best time to refinance on the home. If you plan on living in the home for 2 years or more, refinancing can help you save money and allow those savings to grow after a period of years. Just like a regular mortgage, refinancing comes with multiple closing costs.
While some of these costs may be negotiated lower or waived completely, the total amount can end up being thousands of dollars. These costs will eventually offset, but it's important that you stay in the same living situation to make it worthwhile. For example, if your closing costs are around $3,000 and your new mortgage payment saves you $200 monthly, it will take 15 months to offset the closing costs.
The Top 5 Lenders
Quicken offers a large range of mortgage and refinancing loans, including reverse mortgages, specialist VA and USDA mortgages, refinancing options, and a unique YOURgage option. Quicken promises to use cutting-edge technology to guide borrowers to the best loan product and complete the loan approval process quickly. Quicken stands out for offering home equity loans for almost every possible scenario so that you can find a suitable home financing package speedily, whatever your needs.
Credible.com’s mortgage marketplace builds on the success of the company's marketplaces for student loans, student loan refinancing, and personal loans, which have facilitated more than $1.6 billion in loans. Credible’s integrations with lenders and credit bureaus make it a snap to compare actual, prequalified rates across multiple lenders without impacting your credit score, and you don’t have to worry that your personal information will be shared with any lender other than the one you choose to work with. Once you see an option you like, Credible’s streamlined process and licensed loan officers provide a seamless experience all the way to closing.
Since 1998, tens of millions of people have used LendingTree to find online loans, including personal loans, mortgages, and mortgage refinance loans. The website is built to be easy to use and within minutes you can compare loans from a wide variety of lenders. With the lenders competing for your business, you should have a better chance of getting a loan that works with your budget. The company doesn’t charge any fees for connecting you with lenders, and can provide you with free credit scoring. If you aren’t able to pay much of a down payment, you can still find a loan with LendingTree, which is known for helping people with less than ideal credit find loans. Keep in mind though, that with a lower down payment, you’ll have a higher principal to pay off.
Based in Atlanta, Georgia, AmeriSave Mortgage Corporation has established itself as one of the premier names in the mortgage loans and refinancing industry. The company was established in 2002, and has since expanded its service to 49 states and the District of Columbia. Today, the company offers a quick and straightforward way for potential homeowners and prospective buyers to uncover the loans they need and access funds efficiently. AmeriSave has expanded to employ more than 500 mortgage specialists, and funds billions in home loans every year. Moreover, the company offers a wide variety of mortgage options, including conventional, jumbo, FHA, VA and USDA loans.
LoanDepot offers homebuyers a portal to compare mortgage loan offers. You can access basic mortgage information without signing up for an account, and it’s easy to update your information and view additional loan offers in a simple and straightforward manner. A variety of loans are available to search, including hard-to-find 10- and 20-year fixed loans.
When you initially applied for your home loan, your credit score was an important factor. The same thing applies to mortgage refinancing. Your current credit situation can be an important determining factor as to whether or not you should apply for refinancing. If you've been on time with all of your monthly payments, your credit score should be the same if not better. Along with the mortgage payments, other bills and debt will be considered into the overall credit score. If your credit score has lowered significantly, it may not be worth refinancing. A mortgage company will also look at bank accounts, tax returns, and other financial statements to help qualify you for the refinancing and lower interest rates. In some cases, it may be a good idea to wait a few months and take steps to raise your credit score, thereby improving your refinancing prospects.
Mortgage refinancing can save you money and provide you with more affordable payment options.
Once you've chosen to refinance, be sure to compare the top lenders using these detailed reviews.