You remember shopping for your home and all the careful planning and number crunching that went into it. Well, when it comes to deciding whether or not refinancing is right for you, we suggest you revert to those ways to make sure you’re not getting in over your head. In certain situations, refinancing can be just what you need to get ahead and free up some money for life’s expenditures.
Let’s start from the top. In a nutshell, refinancing your mortgage is essentially applying for a new loan with new terms and a different interest rate. With a refinance, homeowners can choose to extend their loan term to lower monthly payments, or reduce loan terms to pay a mortgage off more quickly. However, most refinancing situations involve homeowners lowering monthly mortgage payments.
From home renovations to children heading to college, we’ve heard all the reasons why homeowners consider the benefits of refinancing. There are many advantages to refinancing. Each person’s situation is different. So, we have listed the pros and cons to refinancing below. A good mortgage lender should be able to talk through your options with you and help you decide before you even start the process.
- Lower monthly payments. In most cases, your mortgage is your largest monthly bill. Life can get expensive at times and certain situations may require you finding ways to add more to your monthly budget.
- Lower interest rates. The more you can pay toward your principal payment, the closer you are to owning your home outright.
- Financial flexibility. Maybe one month you’ll want to pay extra toward your mortgage or maybe you’ll decide to make an improvement on your home, the bright side is that you’ll have options.
- Change your type of mortgage. Refinancing can give you the opportunity to opt for a new type of loan, like switching to a fixed-rate mortgage if your original loan was an adjustable-rate mortgage.
- Seek out a new lender. This could be a good time to compare rates and look for new, viable mortgage lending partners.
- The urge to splurge. We included this drawback as refinancing could be a slippery slope without a plan in place to make smart decisions and change behaviors. It shouldn’t mean more room on your credit card or more cash to spend; extra funds should be productively spent or saved.
- Fees. Along with a loan will come fees and closing costs that you could be required to pay out of pocket. Your mortgage lender can help you run some calculations to determine if this is the right time for you.
- Less mobility. In order to recoup the cost of the refinance you’ll likely need to remain in your home for a certain number of years. You will want to talk through this scenario with your lender as well.
- Paperwork. Such is life, but it should be no surprise that any commitment takes time, energy and a lot of ink will need to dry before the process is over. Depending on the type of loan you choose and how quickly we receive corresponding documents; the loan application process with Chesapeake Bank takes about 45 days. We do our best to take you quickly through the process.
In most cases, refinancing your home opens up opportunity for yourself, your family and your home. If you’re considering a refinance, you’ll want a local lender, like us, that can help you decide if refinancing is right for you. But regardless of who your lender is, make sure you know all you need to know about loan payment options, any prepayment penalties, what the loan will cost and how long it will take to recoup those costs.
Ready to get started?
At Chesapeake Bank, our goal is to provide the highest level of service at competitive rates. We strive to structure your real estate loan and mortgage options to fit your individual needs. Apply now to get started.
Happy house hunting!