Alternatively, a cash-out refinance allows you to get the difference between your current loan and the new mortgage amount paid out in cash after refinancing. Cash-out refinance is a kind of refinance that has the same beneficiaries as a home equity loan. The difference between a cash-out refinance and a home equity loan is the amount of money you can borrow. This amount is based on two different components: the equity you have in your home and your home’s appraised value.

Simply put, owning property and being able to afford pricey monthly payments is a challenging ask across the board. Refinancing your home is likely to be one of the largest transactions you will ever undertake, and interest rates can have a big impact on the cost. Stay up-to-date on the current market changes so you can make the right decision for your financial future.

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Interest Rates are Historically Low

Interest rates fluctuate periodically. The 30-year mortgage rate spiked as high as 18.6% in 1981 and fell as low as 3.3% in 2012. Today’s rate is now near historic lows, and in August 2020, actually fell to 3.19%.

Depending on when you purchased your home, there’s a good chance that the current interest rates are lower than your existing mortgage.

That means that now may be the perfect time to refinance your mortgage, before rates rise again and potentially eliminate one of the biggest benefits for refinancing a mortgage – lower interest rates and lower overall payments on your mortgage.

The sooner you begin the refinance process, the faster you can lock in lower interest rates. Waiting too long could leave you without a really good reason for considering a refi loan.

You Want to Reduce Your Loan Term

Circumstances change. Perhaps you have a better job. Or maybe you’ve inherited money from a relative – or even taken home one of the lesser lottery prizes and hope to reduce the length of time (and overall money) you’ll pay for your home. Refinancing from a 30-year mortgage to a 15-year mortgage can save you huge amounts of money on your home. We’re talking tens of thousands of dollars, if not more.

On the flip side of the equation, some people need to extend the terms of their mortgages to create a little budgetary wiggle room each month. In this case, you might consider going from a 15-year mortgage to a 30-year mortgage. It will cost considerably more in the long run. However, it may be the difference that allows you to keep your home when things get tight.

Switching from an Adjustable Rate Mortgage to a Fixed Rate Mortgage

This is definitely a worthwhile consideration for people who have adjustable rate mortgages facing reassessment soon. With interest rates as low as they are, if you’re an adjustable rate mortgage holder, you could end any speculation or worry you may have about fluctuating rates by switching to a fixed rate.

You may pay a little more, initially, as an interest rate, but may gain incredible peace of mind – the kind of peace of mind that comes from knowing your interest rate can’t suddenly rise sufficiently to price you out of your home.

Home mortgage refinance loans can, in the right circumstances, be the perfect solution for many mortgage woes. The more you know about your options, the better informed decisions you can make about your personal need for a refinance loan and the best type of loan to meet your needs without creating pain in other areas of home ownership.

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Do you ever wish you could have a little extra cash? Don’t we all! Maybe there’s a vacation you would like to take or some things you need to buy for your home. Perhaps you have some high-interest debt that you need to get rid of. If so, you’re not alone!

All of us have been there at one time or another. Fortunately, there are more options available these days than ever before. And if you are a veteran, you are in an even better position. You may find that VA loans give you the cash you need without forcing you to hand over your first-born child.

What is the IRRRL program?

IRRRL stands for Interest Rate Reduction Refinancing Loan. It’s a special kind of loan available just to veterans.The best part is that the IRRRL program allows you to refinance your existing loans at a lower interest rate.

Think of it as Uncle Sam’s way of thanking you for your service. For those who have spent time overseas, this program makes it much easier to start a home back in the U.S.

Reasons to Seek a Refi

A major advantage of these loans is that you may be able to get one with a “no money out of pocket” condition. How exactly is that possible? This is usually done by taking the costs associated with a new loan and rolling them into the total amount of the loan. In other cases, the lender may choose to absorb the costs if the interest rate is high enough to cover them.

The result is extra savings that you could use to improve your overall financial situation. The number one reason to take advantage of refinancing is to tackle credit card debts. Remember, those pieces of plastic carry interest rates well into the double digits, which is typically much higher than your refinanced mortgage rate.

The number one reason to take advantage of refinancing is to tackle credit card debts.

Another great reason to seek a refi is to help save for retirement. While veterans do get some pretty good retirement benefits, it never hurts to save a little extra. If you’re behind on your savings, try putting the money you saved from refinancing into a 401(k) plan. This will make your savings work double time.

Consider Refinancing

In short, the IRRRL program may mean serious advantages for vets. Whether you are looking to take a well-deserved vacation, pay off some high-interest debt, or just have a little extra cash on hand, a VA loan might be just what you need. If you haven’t already, look into your options today. You’ll be glad you did!

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No Down Payment

With a VA loan, there is usually no down payment requirement on a new purchase loan. This can make it easier for veterans to qualify for a mortgage since they don’t need to worry about providing a hefty payment of about 10-20% of the purchase price at the time of the closing.

Lower Interest Rates

The VA doesn’t directly provide the money to you. In fact, VA loans are offered through private lenders that are guaranteed by the U.S. Department of Veterans Affairs. This guarantee allows the lender to offer lower interest rates to members of the U.S. Armed Forces and their family members.

Credit Flexibility

Veterans may be eligible for mortgage assistance two years after bankruptcy or foreclosure. Most lenders require a minimum credit score of 620 for VA home loans. Since this is lower than many conventional lenders, it’s easier for veterans to qualify.

No Mortgage Insurance Requirement

With conventional and FHA loans, lenders typically require mortgage insurance if you pay less than 20% down. This is not the case with VA home loans, as there is no mortgage insurance requirement.

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Pay Off Debt

Many Americans struggle with high-interest debt from credit cards. If the interest rate on a new mortgage is lower than the interest rate on such existing debt, you could save a lot of money by refinancing your mortgage with a home equity loan or cash-out refinance. Your mortgage payments could increase and the term of your loan will likely be extended, although the expensive credit card debt would be paid off entirely and rolled into the amount owed on your mortgage.

Change Your Monthly Payment

If you experience a financial setback and are looking to cut costs, refinancing your mortgage at a lower interest rate could lower your monthly mortgage payment amount. For example, if you owe $350,000 on a 30-year loan with a fixed interest rate of 5%, lowering the interest rate by 1% could lower your monthly payment from about $1,879 to $1,671, saving you roughly $2,500 per year. Alternatively, if your financial circumstances improve and you’re able to afford larger monthly payments, it may be to your advantage to refinance your mortgage and shorten the term. Using the previous example, if that same $350,000 loan is shortened to a 15-year term, the monthly payment would increase to $2,768. However, over the life of the loan you would save over $178,000.

Switch to a Fixed or Variable Rate

Many home loans are adjustable rate mortgages (ARMs), which usually start out as fixed-rate loans and then switch to variable-rate loans after a few years. The major risk with ARMs is that if interest rates increase, then so will your monthly payment, perhaps to an amount that is unaffordable. Refinancing to a fixed rate, while it may increase your monthly payment, will give you certainty on your payment amount without any fear of fluctuating rates. Conversely, if you’re looking to lower your monthly payment, it may be in your best interest to convert from a fixed-rate mortgage to an ARM.

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