Is a Mortgage Refinance Right for You?
“Should I Refinance my home?”
Good question. As the trusted and most experience mortgage brokerage in the area, we get tons of inquiries every year regarding refinancing. Whether you refinance or not, you should always seek accredited advice when making such a big financial decision. Luckily for you, our CFO Mike Wallace, CPA will always make himself available to potential clients for a complete loan analysis to make sure a refinance is right for you.
What is Refinancing Exactly?
In a basic sense, refinancing is changing the terms of your current mortgage to benefit you in some way. To elaborate, it’s purchasing another mortgage with different terms to pay off your current mortgage and effectively eliminate it. Once your old mortgage as it is paid off, this leaves you with a new mortgage that is cheaper, or more tailored to your needs!
Why Refinance My Mortgage?
The first reason would be regarding your mortgage interest rate. You may have been talking to family or a friend and been told, “You know, you should really refinance like I did, interest rates are super low right now!” This is still true, and tends to be the main reason our clients refinance their home loan. A refinance can lower your interest rate on your mortgage and decrease your monthly payments dramatically. During certain macroeconomic conditions, the overall level of interest rates may drop, thereby allowing anyone that's had a loan to refinance to a lower mortgage rate. By doing this, you can potentially save hundreds or even thousands of dollars per month, and even more over the life of your loan! This frees up tons of cash for people on a monthly basis, leaving them more of their income to enjoy. To see just how low we can get your interest rate, Use our FREE Rate Quoter Here. (See Also: “Top 5 Factors that Determine Your Interest Rate”)
But it’s not only a decrease in the general level of interest rates that allows people to refinance. As home owners pay their mortgages off every month, they establish more and more creditworthiness, thereby increasing their credit score. Simultaneously, they're increasing the amount of equity they have in their home, making them less risky to lend money to. With a combination of a higher credit score and a higher amount of equity in your home, you may be able to refinance at a lower interest rate!
The second reason people refinance is to unlock equity in their home.
With this type of refinance, you're effectively giving some of the equity you've accumulated to a lender in exchange for cash. This is ideal for those in need of paying off large amounts of credit card debt that usually carries extremely high interest rates, sometimes around 18-23% in interest! Most of the time, it doesn't make sense to keep that debt when you have value in your home that can be used. Some of our clients choose to use this equity to make other big purchases such funding home improvement projects, or for a down payment on a car. The reason being that the interest rate on the cash from a refinance is far lower than other types of financing for these purchases! that usually carries extremely high interest rates, usually around
Interested in a refinance yet? Get a home refinance analysis from our CFO Mike Wallace, CPA using our FREE Home Refinance Analysis Tool Here.
So How Does the Process Work?
First, our Better Home Financial mortgage team works with you to determine your financial goal, then we find the best lender for your particular needs, at the lowest interest rate possible, at no upfront cost to you! After your provide the necessary documentation, we lock in your interest rate (so there's no surprises later), and begin the loan process. Then we send an appraiser to inspect your home, and tell you what it’s worth today. This also determines the value of equity you have in your home, and how much money a lender would be willing to let you borrow. Once the loan is closed, the new mortgage is used to pay off the old mortgage, and the residual cash is than given to you, the home owner! This allows you to use it for things like lowering debt, putting a down payment on a car, or funding that home improvement project!
Any Other benefits?
Some other benefits of a refinance are reducing or stopping private mortgage insurance (PMI), eliminating the risk of rising interest rates if you switch from a variable to a fixed rate, consolidating multiple mortgages into one payment, and shortening (or lengthening, if desired) the repayment period.
Are There Any Downsides to Refinancing?
Don’t let others fool you. Without an ethical mortgage professional by your side, there could be potentially many downsides to refinancing. Taking equity out of your home is a big financial decision, one that requires sound financial advice when it comes to how best you should allocate that money. Changing to a different mortgage inherently comes with the risk of receiving a loan that may seem advantageous on the surface, but is a better deal for the lender than for you. Some mortgage brokers can unfairly sell you on a loan that actually costs you more interest over the life of your loan, charge high up front fees and mortgage loan points, or expose you to risks of changing interest rates if you switch to variable interest rate loan. After all, these mortgage “experts” know a lot more than the average person, and with that knowledge they easily take advantage of people.
Fortunately, as a brick and mortar store in San Dimas, Better Home Financial is always held accountable for the financial advice that we give to our clients, and have been for nearly 30 years. We’ve built our business on a foundation of trust and that no other mortgage broker in our community can match. The bottom line is that when it comes to asking someone for financial services, you have to know you can trust them.
You shouldn’t have to worry whether or not your mortgage broker really has your best interest in mind, or if they are truly on your team. At Better Home Financial in San Dimas we believe that honest service, friendly attitudes, and making decisions truly in the best interest of our customer is the only way to do business and serve our community. We walk our clients through the entire mortgage process, are always accessible for questions, and can help you find a mortgage solution with NO upfront cost to you! With two highly experienced CPAs at the helm of Better Home Financial, our expertise in the industry is unparalleled, giving our customers the confidence they are making the right financial decision for themselves and their family.
Next time you have any refinancing or mortgage questions, don’t hesitate to use our simple online tools, or give us a call! We’d love to opportunity to find you the best refinancing solution for you. Click here to get started!
- The Better Home Financial Team