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If you have an adjustable rate mortgage or a high interest rate, you may want to consider refinancing. A bank or mortgage firm can talk with you about your current assets and how a new mortgage can benefit you by: - Lowering your monthly payment: A lower interest rate usually means a lower payment, leaving you with more money each month for other things. You may want to consider an adjustable rate mortgage that has an even lower payment during the initial period rather than fixed-rate loans. - Change your loan term: Instead of lower payments being your priority, you may just want to pay your loan off faster. With a reduced interest rate, you could possibly keep your payment around the same cost, but have a shorter repayment term. Most institutions offer 10, 15, 20, and 30-year terms. - Use the cash-out option for other debt or home improvements: With a cash-out package, you borrow against the home equity in addition to the mortgage balance. You can use these funds to make home improvements, pay for college, or consolidate other debts into a lower payment. How it works When you talk with a company about refinancing, you will go through an application, approval, and closing process, much like you did with your original mortgage. You will need to gather your financial information, including: - Mortgage information - statements showing balance and payment history; also include information on any second mortgage you may have. - Other debt - information on car loans, credit cards, or any other regular monthly payments. - Income details - your pay stubs for a period of time, as well as recent income tax returns. Options While each financing company may have different packages available depending on your particular situation, most will have these basic options: Traditional With traditional programs, you can generally get a lower interest rate, lower payment, shorter term, or another beneficial outcome based on your goals. Regardless of who holds your current mortgage, most financial institutions will offer various options and rates. They are usually backed by Fannie Mae and Freddie Mac, and these are generally the lowest cost options that you will find. Cash-Out If your home has increased in market value since your last mortgage, you may be able to refinance for an amount greater than you currently owe. This means you will have that extra cash at closing to make home improvements, pay for college, or consolidate other debt. As with traditional loans, you have conventional options with specific income and credit score requirements, as well as government-backed FHA and VA programs. Streamline This type of refinancing option is usually available if you have a current mortgage with the same lender. They can skip some of the traditional steps since they are likely familiar with your payment history. There is less paperwork to fill out, which means less hassle for you and the lender. This relationship may also mean you qualify for a better loan term or lower interest rate. Talk with a financial professional today about your refinancing options. Whether it is a lower payment, better interest rate, or better loan terms, you can find the package that is right for your particular situation. To learn more about their options for refinancing, Ann Arbor, MI residents should visit http://huronvalleyfinancial.com/resources.
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