Which refinancing option is best for you?
It seems as if there are almost as many loan programs as there are borrowers. There aren’t that many, of course, but how will you know which one is right for you? Wave Lending Group will help you narrow the field of options and find you the best loan program to fit your needs.
Here are a few questions to ask yourself:
Are you refinancing primarily to lower your rate and monthly payments? If so, your best option might be a low fixed-rate loan. Maybe you have a fixed-rate mortgage now with a higher rate, or maybe you have an ARM (adjustable rate mortgage). Upon qualifying for a fixed-rate mortgage, you lock the current rate for the life of the loan. This is a good idea if you won’t be moving within the next five years or so. If you do see yourself moving soon, however, 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 want to pay for home improvements, pay your child's college tuition bill, or take your dream vacation. In this situation you'll need to qualify for a loan greater than the balance remaining on your current mortgage. If you've had your current mortgage for a number of years and/or have a mortgage with a higher interest rate, you may be able to refinance without increasing your monthly payment.
Do you want to cash out some equity to consolidate other debt? This is a great idea. If you have enough equity in your home, paying off other debt with higher interest rates than the interest rate on your mortgage (credit cards, home equity loans, car loans, some student loans) could save you hundreds of dollars a month.
Do you want to build up home equity more quickly, and pay off your mortgage sooner? If so, 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 build up equity more quickly. If you have had your current 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 — you may even be able to decrease it. Wouldn’t that be nice? Here’s an example: let’s say years ago you took out a $150,000 30-year mortgage at eight percent. Your payment is about $1,100, exclusive of taxes, insurance and so on. If your balance today is down to $130,000, you might take out a 15-year mortgage at six percent and have an almost identical monthly payment. This is a great option for people whose main goal is not to save money on their monthly payment but rather want to build up equity and pay off their home more quickly.
