At Georgetown Mortgage, we understand that your home is a large investment as well as a valuable asset. There are numerous ways to take advantage of your home’s worth, including refinancing your mortgage, getting a home equity loan or line of credit, or simply refinancing with a bit of extra cash out. If you’re considering any of these options, contact Georgetown Mortgage today and we can help you find the best solution for you and your home.
Refinancing a mortgage means that a borrower pays off the existing loan to replace it with a new one. This replaces the current mortgage with new terms, new monthly payments, and a new payback duration. The new loan is then used to payoff the remainder of the old one, and then the borrower begins making payments on the new mortgage. This may allow the borrower to tap into their home’s equity or consolidate their debt. This is usually a good option when interest rates have dropped or for individuals who have built up good credit during the term of their current mortgage.
More Benefits of Mortgage Refinancing:
- Lowering Your Interest Rate: The chance to secure a lower interest rate is one of the most common reasons that homeowners choose to refinance. Experts today estimate that it’s worth your time and money to refinance if you can reduce your interest rate by as little as 1%.
- Converting Between Fixed-Rate Mortgages and Adjustable-Rate Mortgages: As interest rates rise and fall, it may no longer be in your benefit to have a fixed-rate mortgage or an adjustable mortgage. Refinancing your loan gives you the opportunity to switch from one to the other based upon the broader interest index.
- Shortening Your Mortgage’s Term: When standard interest rates begin to fall, it may be in your best interest to refinance your mortgage loan. This would allow you to obtain a loan with similar monthly payments that you would be able to pay off more quickly.
Cash Out Refinancing
If you’re looking to refinance your mortgage, but could also benefit from some extra cash on hand, then cash out refinancing may be a good option for you. Basically, a cash out refinance allows you to tap into the equity of your home by paying off your current loan with a new one, while getting some extra cash leftover.
It is important to realize that cash out refinancing does not mean that you are receiving free cash. When choosing a cash out refinance, you are replacing your current mortgage with a new mortgage whose balance will be larger. This new loan will consist of the balance of your original loan plus the amount of extra cash-out.
Cash out refinancing is a great option if you’re early into your current mortgage, can find a mortgage with a better interest rate, and have a bit of equity in your home. This is a good way to get some extra cash to cover a large upcoming expense, such as a child’s college tuition or purchasing a new car.
Home equity is the difference between the current market value of your home and the current owed balance on your mortgage. You build up your home equity by paying your mortgage to minimize the balance subtracted from the appraised value of your home and by making home improvements that will increase the value of your home.
It is important to build your home equity because you can use it to borrow money in the future. There are two ways this can happen:
- Home Equity Loan (HEL): Home equity loans are also known as second mortgages. With this type of loan, the borrower uses their home equity as collateral. This lowers the home’s equity, but also gives you the ability to cover a major upcoming expense such as medical bills or homes repairs. The loan is disbursed to you in a lump sum when the loan closes.
- Home Equity Line of Credit (HELOC): A home equity line of credit is a line of credit that comes with an adjustable interest rate. You get an amount of money that you can draw from over a specified period, and you pay it back with monthly payments.
Taking out a home equity loan or line of credit can be a good alternative to mortgage refinancing. Although it may result in higher monthly payments at the outset, eventually, it will result in much lower monthly payments.
Why Refinance Your Mortgage with Patty Newby
At Georgetown Mortgage, we understand that choosing the best mortgage option for your financial situation is a complex endeavor. This is why we take a detailed look at your situation and work with you to determine the optimal mortgage solution for you. Patty Newby is prepared to make every effort to find the best financing option for your unique situation.