In 2023, consider refinancing your home since home prices are going up, and mortgage rates are very low. Learn about your options to save money.
Six Refinancing Options to Consider
Exploring refinancing could be a wise move if you observe that current mortgage rates are lower than your existing loan rate. Selecting the right refinancing option has the potential to save you thousands of dollars.
You might consider refinancing if:
- You want to pay off your loan more quickly.
- You’ve earned enough equity to refinance without mortgage insurance.
- You want to access your property’s equity.
- Instead of just looking for the lowest interest rate, your refinancing choice should align with your financial situation. Understanding your options is crucial to find the one that suits your needs and goals.
Here’s an overview of the most common refinance programs:
Reverse Mortgage
A reverse mortgage is perfect for those aged 62 or older with sufficient property equity. If you currently have a refinancing program and want to switch to a reverse mortgage, you don’t have to make loan payments while you’re alive.
You’ll also get funds from your home equity that you can use however you like. However, you still need to pay homeownership fees and the mortgage over your loan term. If you pass away or decide to sell your property, the balance will be due to your lender, and your heirs or the home sale will cover the payments.
Cash-Out Refinance
In cash-out refinancing, you get a new, larger mortgage loan on your property than your original loan. The extra money between the two loans is given to you in cash.
Choosing cash-out refinancing won’t increase your monthly payments because the bigger loan will replace the current one. However, be aware that there will be a new amount for your monthly payment under the new refinancing program.
It’s important to carefully read the details to understand how a cash-out refinancing program will impact you.
FHA Streamline Refinance
If you have an FHA loan, the FHA Streamline Refinance can help reduce your monthly payments without needing another FHA appraisal.
There are two options: non-credit-qualifying and credit-qualifying. The first one doesn’t involve checking your credit score and debt-to-income ratio, while the second one does involve these checks for your FHA loan.
USDA Streamline Refinance
The USDA Streamline Refinance, provided by the United States Department of Agriculture, lets borrowers modify their loan terms and reduce their interest rates, making it suitable for those with low property equity.
Opting for a USDA Streamline Refinance means you won’t need property inspections or appraisals. Factors like credit score, debt-to-income ratio, the number of payments on your previous loan, and whether the mortgaged property is your primary residence are considered to qualify. You can decide between USDA Streamline-Assist or USDA Streamline Refinance options.
VA Streamline Refinance
Active service members and military veterans can be eligible for a VA Streamline Refinance, providing them with benefits such as:
- Lower interest rates
- Reduced monthly payments
- Lower VA funding fee
The option to change their loan terms from adjustable-rate to fixed mortgage
To qualify for a VA Streamline Refinance, also known as VA IRRRL, as a service member, veteran, or surviving spouse, you just need to provide proof of residence.
Cash-In Refinance
Unlike a Cash-Out Refinance, a Cash-In Refinance involves putting a significant amount of money into the refinancing program instead of taking it out. By paying a substantial portion of your mortgage balance, you can boost the equity in your home and reduce your loan-to-value ratio.
This action may lead to lower interest rates and monthly payments. A cash-in refinancing option is beneficial for individuals with low home equity or mortgages that exceed the property value.
If you’re looking for financial help, consider refinancing. There are many options to choose from, so you can find one that fits your budget and needs. However, it’s important not to rush into it. Do your research and consult with experts to find the right option that can save you money, lower your monthly payments, and reduce interest rates.