When you purchased or last refinanced your home, your interest rate was determined by the current financial environment and the loan program that you solidified at the time. Of course, while certain factors like your credit rating and the amount of the down payment you could afford also influenced your interest rate, the single most important factors were the prevailing rate at that moment, your qualification parameters at the time, and the loan program you selected.
However, interest rates fluctuate. So when the Federal Reserve enters a declining rate period, the prevailing rates may become significantly lower than when you originally purchased or last refinanced your home. So by refinancing your mortgage when interest rates are lower, you can exchange a higher interest rate for a lower one, which will lower your monthly payment and give you more disposable income to pay other bills or put into a savings plan.
If you’ve enhanced your qualification parameters, such as your credit score, your equity, income, etc., then you may have earned a better interest rate as well. You can also simply retailor your current loan scenario to lower your payment as well. Let the experts at Wyndham Capital show you how to do this most effectively.
One way to put more money in your pocket to allow for other investments or needs is to tap into the equity you've built in your home through a cash-out refinance. In this scenario, you can refinance for an amount higher than your current principal balance and take the extra funds as cash. A Wyndham Capital cash-out refinance can provide money for everything from remodeling your home, paying off high-interest rate bills, sending your kids to college, or reinvesting this equity into other investments.
Another advantage of home refinancing is that you can shorten the term of your mortgage. Let's say, for example, you originally had a 30-year mortgage and have been paying it for eight years. Thanks to mortgage refinancing, you can switch to a shorter term of 15 or 20 years, which may save you thousands of dollars in interest payments over the life of the loan. This can allow for you to save and reinvest this capital. It will also help you with your retirement planning or other long term investment strategies. Also, if the refinance rate is lower, but you maintain a similar monthly payment, you may build up equity in your home faster since more of your monthly payments will be going towards paying down the principal instead of paying interest to the lender.
If you were unable to make a down payment of 20 percent when you originally purchased your home, you may have had to purchase Private Mortgage Insurance or PMI. If your house has appreciated since then, and you've steadily paid down your mortgage, your equity may now be more than 20 percent. So by refinancing, you will no longer need PMI, which means you can reduce your monthly mortgage payments.
ARMs make a lot of sense for a large number of borrowers with certain financial goals for a specific period of time. However, as interest rates fluctuate, that adjustable rate will eventually reset to a different interest rate, which is variable and depends upon the interest rates at the time.
Contact us today to find out if refinancing is right for you:
The figures shown are estimates and provided for information purposes only.
The actual figures may vary based on loan product, credit profile, property value, geographic location, occupancy and other factors.