As a homeowner, you may encounter scenarios where it makes sense to refinance your mortgage. Refinancing is when you pay off your existing loan and replace it with a new loan. Homeowners often choose to refinance their mortgage because interest rates fall below a certain threshold that leads to a savings on monthly mortgage payments, but there are additional motives for considering a refinance.
How Does Refinancing Work?
If you remember the mortgage application process when you bought your home, refinancing won’t take you by surprise, as it’s a similar process. Fortunately, if your credit has improved since you originally took out a mortgage, you could qualify for more favorable terms on your refinance. You’ll supply your financial information like you did for your original mortgage application and your C&F Mortgage loan officer will guide you through the full lending process for your refinance.
Reasons for Refinancing
1. Interest Rate Changes
Mortgage interest rates fluctuate so there’s a chance that at some point in your homeownership journey, the rates will be lower than your current rate. In some circumstances, it’s worthwhile to take advantage of these lower rates by refinancing. As a rule of thumb, when rates drop 1 percent or more lower than your current rate, you might want to consider a refinance. Keep in mind that there are closing costs involved, so you will need to figure out when the monthly cost savings will begin to pay off which a C&F Mortgage loan officer can help you calculate.
2. Home Repairs
If you have a decent amount of equity in your home and need to make some home repairs or upgrades, you can tap into that equity to fund these projects. As a bonus, home projects could add value to the home if or when you decide to sell.
3. Large Purchases
If you’re preparing to send a child off to college or pay for a wedding, you may be in need of additional cash. Refinancing can save you money on your mortgage payment each month that you can then put toward large purchases. Alternatively, you can tap into your home’s equity through a refinance and use the cash to pay down debt or fund necessary purchases or events.
4. Changes to Loan Term
If you have an adjustable rate mortgage, you may find it beneficial to refinance to a fixed-rate mortgage. Likewise, if you had a 30-year fixed-rate mortgage and rates have dropped, you may be able to refinance to a 15-year fixed-rate mortgage and keep your monthly mortgage payments the same or similar – and you’ll be able to pay off your mortgage much sooner.
5. Purchase a Vacation Home
If you’ve been considering purchasing a vacation home, you’ll need a down payment in order to finance a second home. In this scenario, you may find it beneficial to refinance your primary residence in order to put cash toward the vacation home purchase.
If you’re interested in learning more about refinancing your home, contact your local industry experts at C&F Mortgage to discuss your options. We offer a variety of products and programs to meet your unique needs. Our team is focused on you and we’re here to guide you through the lending process from start to finish.