Home Refinancing When You Already Have a Low Rate
- posted 2.25.2014
- Chelsea Beebe
- Home Loans
When I first started at New American Funding, I was hired as a Customer Service Representative. My job entailed taking incoming calls from potential borrowers. 9 times out of 10 the first words out of the borrower’s mouth were: "What are your rates today?" Because I was unlicensed, I was unable to provide the rates, and would need to transfer the borrower over to one of our licensed loan specialists for a complimentary rate and to discuss any other benefit that could be obtained through a refinance. However, many people aren’t interested in taking the five minutes to speak with a Loan Officer and to learn more about additional benefits of refinancing because they believed if they already had a low rate, there is no possible way they could be getting a better deal.
But this is so far from true; there are so many other options and products that can be offered through a refinance other than simply lowering your interest rate. So here are a few things to consider the next time you are interested in refinancing even though you already have a pretty good rate:
Do You Have a Government Loan or a Conventional Loan?
There are pros and cons to each: Conventional loans require that you come in with more money down (which can sometimes be difficult for first-time home buyers who are younger and have just started their career) whereas FHA loans requirements are significantly lower down payment, and have much more lenient guidelines when it comes to credit related issues, but also come with a monthly mortgage insurance fee that will increase how much money you are paying towards your mortgage. Do you have mortgage insurance that you do not want to pay anymore? Switch to a conventional loan. Have you recently gone through a bankruptcy, foreclosure or short sale? Maybe going into an FHA loan could help you get better terms.
What Is the Life of Your Loan?
How long will you be paying off your loan? 30-years, 20, 15? Consider how long you have already lived in this home. Are you planning on staying in this house, or moving some time in the near or distant future? If you are planning on staying, why not try extending the life of the loan to lower your monthly payment? Or, if you really are set on trying to lower that rate, try shortening the life of the loan to ensure a lower rate, even if the payment is slightly higher. Shortening the life of the loan will also help you pay off your home significantly faster and could save ten of thousands in interest over the life of your loan.
Is Your Property Around 200 Underwater?
While the government is still working hard to amend guidelines for underwater properties, there are a few programs that you might qualify for if your home has not started to gain equity yet. The HARP Refinance allows borrowers in a loan who are owned by either Fannie Mae or Freddie Mac, who meet the necessary credit requirements, to refinance. The FHA and VA Streamline programs allows those who are in a FHA or VA loan to refinance with no appraisal required.
Has Your Home Gained Equity?
The market is finally starting to make a come-back and many people are now starting to gain equity back in their homes. A cash-out refinance is such a simple and smart way to pay off high interest credit cards, student loans, or any other revolving debt that may feel like a burden to you and your family. You could also use the money to make home improvements and hopefully raise the value even more. Or if you aren’t concerned about debt or home improvement, take a vacation, buy a new car, or simply use the cash for anything else. You deserve it!
Do You Qualify for a VA Refinance?
Have you or your spouse served—or are currently serving—our country in the military? If so, you may qualify for a VA loan. There are so many benefits to a VA loan such as: no down payment options on purchase loans, no monthly mortgage insurance, and cash out refinance just to name a few. After applying for a Certificate of Eligibility, let our Loan Officers help you take advantage of this awesome program.