How Does Mortgage Refinancing Work?
Mortgage refinancing can be an excellent option for many reasons. Refinancing your mortgage can help you save money over the long run. It can also get you the money you need for a big renovation project or other large price tag items that come up in life. Ask your BMC Mortgage and Investments advisor how mortgage refinancing can work for you.
How Does Mortgage Refinancing Work?
If you are thinking about refinancing, your first assignment is to assess the new interest rates you qualify for. If you can determine that you will qualify for the same or lower rates, the next step is to identify why you are refinancing. Are you refinancing to:
- Save money on interest?
- Borrow against your home equity?
- Lower your monthly payments?
If you are looking to borrow against your home equity, here are some things to consider. When you are refinancing, you can generally borrow 80% of your current home's valuation. Let's say that your home now is valued at $300,000 and you owe $150,000 on your current mortgage. To refinance, you will need to borrow at least the $150,000 that you owe to roll the balance over into a new loan. After that, you are left with an amount of up to $90,000 that you can borrow and use for other purposes.
Assuming that the mortgage refinancing loan is for the same length of time as your original loan and the interest rate is the same or lower, your new monthly payments will be comparable or less than the monthly payments you are making now. One important thing to keep in mind with refinancing your mortgage is that you will have to pay closing costs just like you did on the original mortgage to refinance.
Who Does Mortgage Refinancing Work For?
Mortgage refinancing can be a better option than a home equity loan or HELOC loan if you can get the interest rate on your new mortgage down from the original loan or if you can't afford additional monthly payments. Refinancing your mortgage can work well in the following situations:
- You can get a much lower rate than the original loan.
- You need a lump sum of cash for a big-ticket item or venture.
- You are buying more property.
- You need to lower your monthly payments.
- You cannot afford to add to your monthly liabilities.
How Do I Find Out More about Mortgage Refinancing?
Your mortgage broker will have access to more options than the local bank when it comes to refinancing or looking to use the equity in your home to your advantage. Give BMC Mortgage and Investments a call to better understand how mortgage refinancing can help you achieve your finical goals.
Learn More About USING YOUR HOME EQUITY TO QUALIFY FOR A LOAN