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Home Loan Refinance

Refinancing- What to consider

Posted 9/30/2014, Written By: Dean Butterfield

The largest asset most families have is their home; so it makes sense to understand all the options available in how to effectively manage the financial aspect of that asset.  One way is through refinancing, but who should you chose for a lender?  What options are out there in getting refinanced?  Is it even a good idea to refinance?  Let's consider a few of the biggest issues and questions.

Which type of lender should I use?

There are 3 main types of mortgage lenders available:  direct lenders, brokers and depository lenders (bank, credit unions, etc.).  Each have their have benefits depending on your goals and needs.  Direct lenders typically offer fast service (about 3-4 weeks on a typical refinance) and lower closing costs.  Brokers "shop around" for the best program, rate and costs for the borrower; but you may often pay a bit higher interest rate as a broker is, in essence, a "middle man."  Depository lenders can vary in turn times depending on the size of the bank / credit union (sometimes as long as 3 months), but offer a "ready-made" approach to getting the mortgage done.

What options are there for me?

Under the umbrella of refinancing, there are two types:  Rate/Term or Cash Out refinancing.  A rate/term refinance means you are simply looking to refinance what you currently own on your existing mortgage; whereas a "cash-out" mortgage would pay off your existing mortgage (if you still have one) and get additional cash out, pay off other debt or roll two mortgages into one.  

The two big differences between the programs are in regards to the interest rate and needed loan-to-value (LTV).  Generally, the interest rate on a rate/term refinance will be ¼ to ½ percent lower than on a cash-out program.  Also, cash-out programs restrict the available loan amount to a certain percentage of the appraised value.  

Is it a good idea or time to refinance?

If you ask a loan officer that question, they will of course say "Yes!". Again, the time to refinance depends on your goals, needs and desires.  For some, getting the lowest payment possible is the goal to save money each month.  Others would like to reduce the time left on their mortgage, take cash out to pay off bills or remodel their home.  Interest rates are still low and will likely be for the foreseeable future. So, if you've thought about refinancing it's a great time to call and see what options are available.

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