Why Refinance?

The most common reasons for people to refinance are to lower their monthly payment, shorten the term of their mortgage, or take out cash.

Lower Monthly Payment

Having a lower monthly payment can free up a lot of room for other things in your budget. There are a few ways that you can make your monthly payment lower:

·         You may be able to refinance to a lower interest rate. If rates are lower than they were when you bought your home, then it is worth speaking with your lender to find out what your new rate could be. Lowering your interest rate means lowering the interest portion of your payment, which can save you in the long run.

·         You can also refinance to remove Private Mortgage Insurance (“PMI”) from your payment. Mortgage insurance is required when you put down less than 20%. You can save hundreds of dollars a month by refinancing and removing PMI.

·         You can also lower your payment by changing your mortgage term. Your loan officer can provide you with complete illustrations.

Cash Out

Refinancing your mortgage can also allow you to use the equity you have built in your home. With a cash-out refinance, you can refinance for a higher loan amount than what is owed and withdraw the difference. Any of the funds that you would receive would be tax free. These funds could be used to:

·         Pay off high-interest credit cards or student loan debt

·         Finance home improvements

·         Pay for college education

·         Or whatever else you need

Changing your Mortgage Term

By shortening the term of your mortgage, you can save money on the amount of interest you will pay over the life of the loan. This might also bring you a lower interest rate than your current one. A lower interest rate and fewer payments will mean savings in the long run.

When you shorten the term of your loan it may increase your monthly mortgage payment, but less of your payment will go towards interest, and more of it will go towards the principal loan balance. This will allow you to pay off your loan faster and build equity.

Applying for your Refinance

When you are preparing for the refinance process it is important to have all of your important financial documents handy so you can close your mortgage without too much delay. Here is a checklist of what you will need:

·         Two of your most recent pay stubs

·         Two of your most recent banking statements

·         Two previous years of W-2’s

If you will be refinancing with a partner or spouse, they will need to provide all of these documents as well. If you are currently self-employed, you may need to provide more financial information.

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