Refinancing

Which refinancing option is best for you?

In today’s mortgage market, there are almost as many different kinds of loan programs as borrowers! Dell Franklin works closely with you to discuss your situation and determine the best loan program for your needs.

There are some general considerations to keep in mind when choosing a program:

Are you refinancing primarily to lower your interest rate and monthly payments?

Your best option might be a low fixed-rate loan. Maybe you currently have a fixed-rate mortgage with a higher rate, or maybe you have an adjustable rate mortgage (ARM) with a variable interest rate. Even if it the rate is low now, unlike an ARM, a fixed-rate mortgage locks in that low rate for the life of the loan. This is can be a good strategy if you do not anticipate a move within the next five years. If you do see yourself moving within the next few years, an ARM with a low initial rate might be the best way to lower your monthly payment.

Are you refinancing primarily to cash out some home equity?

Maybe you need to pay for home improvements, pay your child’s college tuition bill, take your dream vacation, or invest in another property. Then you want to qualify for a loan for more than the balance remaining on your current mortgage. If you have had your current mortgage for a number of years and/or have a mortgage whose interest rate is higher, you maybe able to do this without increasing your monthly payment.

Are you interested in cashing out equity to consolidate other debt?

Good idea! If you have sufficient equity in your home as collateral, you can save money by paying off other debt withhigher interest rates than the interest rate on your mortgage — for example,credit cards, home equity loans, car loans, and some student loans. This can help you save hundreds or thousands of dollars each month.

Do you want to build up home equity faster, and pay off your mortgage sooner?

Consider refinancing with a shorter-term loan, such as a 15-year mortgage. Your payments will be higher than with a longer-term loan, but in exchange, you will pay substantially less interest and will build up equity in a shorter period of time. If you have had a 30-year mortgage for a number of years and the loan balance is relatively low, you may be able to do this without increasing your monthly payment – and you may even be able to save money!

For example, a 30-year mortgage for $150,000 at 8% is usually about $1,100per month, excluding taxes, insurance and other homeowner expenses. If your balance is down to $130,000, you couldrefinance with a 15-year mortgage at 6% and have an almost identical monthlypayment. This is a great option for homeownerswhose main goal is not to reduce their monthly payment but rather build upequity and pay off their mortgage in a shorter period of time.