What is Home Equity and What Can I do with it?July 5, 2019
The first you should consider in deciding whether you should refinance your home is to establish your goals. The most common reasons homeowners will decide to refinance are to get cash-out, lower their payment or shorten their mortgage term.
Refinancing is a great way to utilize the equity that you have accrued in your home. With a cash-out, you apply for a higher loan amount than what you owe on the house and you get to keep the difference.
This is a great way to pay off high-interest credit card debt as well as student loan debts. Mortgage interest rates are typically lower than interest rates on other debts, therefore, a cash-out refinance can be a great way to pay off your debts.
- Lower Your Payments
If rates are lower then when you bought your home, you refinance at a better rate which will allow you to lower your monthly interest payments. You can also lower payments by changing your mortgage term. Lengthening your term can stretch our payments over more years which makes each payment smaller.
- Shorten Your Mortgage Term
Shortening your mortgage term is a great way to save money on interest. Over time, a shorter mortgage term means that more of your monthly payments will go towards paying off your home as opposed to paying interest.
Furthermore, a shorter mortgage term often also means a lower interest rate and a better interest rate with a shorter mean can equal big interest savings in the long run.
What you need to know
Once your goal has been established and you are ready to apply for a refinance, you’ll need to consider your financial situation.
- Your Credit Score
Knowing your credit score will help you determine what program you are eligible for. Your credit score can often determine whether you can get approved for a loan. Having a low score may greatly limit your options, but not with Optionwide. We work will all credit scores to help you reach your financial goals. Learn more about our programs by visiting Optionwide.com or give us a call at (888) 920-6415.
- Your Monthly Mortgage Payment
Knowing how your monthly mortgage payments fit into your budget will help you determine and evaluate your options. If your goal is to lower your payments, then it’s important to decide how much you need for the refinance to be worth it. If you want to take cash-out or shorten your term, then you must be ready for higher monthly payments.
- The Value of Your House
Having an estimate on how much your house is currently worth is very important. This determines how much your lender can lend you. They cannot lend you more than your home is worth, therefore, an appraisal that comes back lower than expected can greatly affect your refinance.
The best way to estimate your house’s value is to check the sale prices of similar homes in your neighborhood.
Once you establish your refinance goals and are ready to start the process, determining the right lender is the next step. Optionwide.com offers a variety of programs to fit every borrower’s needs; from the self-employed to those with mortgage lates or low credit. Get a free quote and consultation by visiting Optionwide.com or give us a call at (888) 920-6415.