When Should You Refinance a Mortgage

Are you looking for an option to reduce the amount you pay on your mortgage each month? Refinancing a mortgage can be a great way to save money and lower your monthly payments. However, deciding to refinance a mortgage can be an intimidating process, especially if this is your first home. But timing is everything when considering this type of financial move, and it’s possible to save a lot if you make refinancing part of your overall financial picture at the right time.

Fortunately, many indicators will help you decide whether or not it makes sense to refinance. Read on to learn when you should consider refinancing your mortgage to take advantage of potentially lower interest rates and reduced monthly payments – allowing you to reduce debt more quickly or free up cash in your budget each month!

Reasons to Refinance your Mortgage Loan

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For most Americans, purchasing a home will be the biggest financial decision they make in their lifetimes. Owning a home carries low financial risk and provides access to capital as equity builds in the property. Refinancing your mortgage loan can offer a way to access that capital. Here are three common reasons people refinance:

  • Rate and Term: A rate and term refinance can help you reduce your interest rates or lower the length of your loan. This type of refinance works best if you want to keep the principal balance of your loan more or less the same.
  • Cash Out: A cash-out refinance is a great option if you have equity built up in your home and need extra cash. You’ll use the existing home equity to refinance your current mortgage and receive additional cash above what you owe.
  • Cash In: A cash-in refinance is when you refinance your mortgage with more money than what you owe to reduce the amount of your monthly payments. This type of refinance may not be the best option if you’re looking to save money in the long run, but it could be helpful for those looking for a short-term solution.

Reduce Your Rate by At Least 0.5%

It’s important to note that refinance rates vary from lender to lender. Make sure you can reduce your rate by at least 0.5% compared to your current rate for a refinance to be worth it.

You Can Afford to Refinance to 15-Year Mortgage

By understanding when it makes sense to refinance your mortgage, you can make an informed decision and confidently embark on the refinance process. 15-year fixed-rate loan terms carry many benefits including lower interest rates and a reduction in the total cost of the loan. The downside of a shorter term is that the monthly payment is generally higher than on a more traditional 30-year term. If you have a lot of equity in your current home or have the means to make a larger monthly payment, consider a 15-year refinance term – you might be surprised at how much you can save!

You are Interested in switching to a Fixed Rate Mortgage

While interest rates on an adjustable rate mortgage can be a great way to save money in the short term, a fixed-rate refinance mortgage can offer stability. So, if you’re looking for a loan with a locked interest rate and predictable monthly payments, this could be the perfect option for you to refinance under.

You are Considering an Adjustable-Rate Mortgage

On the other hand, if you’re looking to refinance your loan with lower introductory rates, an Adjustable-Rate Mortgage option might be right for you. Refinancing with an Adjustable-Rate Mortgage gives you more flexibility when interest rates are high, however the introductory rate is only guaranteed for the first few years of the loan term.

Your Financial Situation has Improved

If your credit score, income, employment, and debt-to-income ratio have all improved since you initially obtained your mortgage loan, refinancing could be a great way to get a lower interest rate on your mortgage loan. Make sure to compare refinance rates with a trusted loan officer before jumping into the refinance process – you’ll thank yourself later!

The Refinancing Process

Get Pre-approved

Work with an Intercoastal Mortgage Loan Officer to ensure that you meet all the qualifications to refinance your loan before proceeding with the refinance process. The pre-approval process typically takes a few days at which point our Loan Officers will present the best loan options for you.

Fill Out the Application Paperwork

Once you’ve been pre-approved, your lender will provide the application paperwork for you to fill out. Ensure you read through the refinance documents carefully and provide accurate information – this is essential to ensure a smooth refinance process!

Sign the Initial Disclosures

Once you’ve filled out the refinance application paperwork, your lender will provide initial disclosure documents. These documents outline all the costs associated with refinancing, including title fees and closing costs. Make sure to read through this document and ask questions before signing it.

Provide Asset Verification Documentation

Your lender will also require you to provide documentation verifying your assets, such as bank statements, tax returns, and proof of income. This information is necessary for the refinance process to move forward.

Submit Loan Conditions to the Underwriter

Once you’ve provided all the necessary documentation, your loan application will be sent to an underwriter who will evaluate your loan conditions. This process typically takes a few weeks, and the loan officer will keep you updated on the status of your refinance application.

Sign the Final Paperwork

Once the refinance is approved, you’ll be asked to sign the final refinance documents. Make sure to read through all the paperwork before signing – this will ensure that there are no surprises when it comes to your new loan!

Begin Making Payments

Once the refinance documents have been signed, your new refinance loan will be finalized, and you’ll begin making payments. Most new loans come with a one-month deferral so make sure to clarify when your first payment is due.

Find an Intercoastal Mortgage Loan Officer Near You!

Refinancing your mortgage can be a great decision when the situation calls for it. Not only will it save you a ton of money in the long run, but it also opens up various opportunities to adjust your loan to suit your needs better. Before refinancing, however, make sure you know what conditions are ideal for taking this approach and that it fits within your goals for financial security in the future. You should also compare lenders and shop around for the best rates and cost estimates to make an informed decision.

At Intercoastal Mortgage, we specialize in home loans and refinances and would be more than happy to go over any questions or concerns you may have regarding the process. Contact us today to find out more information and explore refinancing options that work for you!

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Working with Intercoastal mortgage has been a great experience! They have been attentive to my needs, responsive to my requirements and time constraints, and are knowledgeable of the standard processes as well as nuances involved in securing a mortgage to meet my needs. I will gladly work with them in the future and recommend them as a top-tier loan servicer.

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I cannot recommend Intercoastal Mortgage enough! They went above and beyond to ensure our refi helped us achieve our goals. Our loan was a long process and ICM gave great advice throughout. They took lots of time to ensure we were satisfied, and the team there was also amazing. Quick to respond to questions and very easy to work with!

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