Ordinarily, a mortgage refinance offers the lowest possible interest rate, beating out a home equity loan (HEL) or home equity line of credit (HELOC).
In certain circumstances, a cash-out refinance can lower your interest rates as well. If mortgage rates were much higher when you bought your home, a cash out loan can drop your rate. If you bought a house in 2000, for instance, your mortgage rate was probably around nine percent. The average is now much lower than that.
If pulling your interest rate down is your only concern, traditional refinancing remains a better option than a cash-out refinancing. If you need the cash, though …
The two main types of loans are adjustable rate loans and fixed rate loans. The fixed rate loan can be as long as thirty years or as short as 10 years. The interest rate stays the same over the lifetime of your loan. There are several reasons why you would want to do this. First, you can plan your budget easily. You can reduce the amount of money you pay each month by extending the term of your loan. Finally, you never have to think about the current mortgage rates, unless you want to.
Seven years is the magic number. If you think you will not sell your home for at least seven years, a fixed rate mortgage is probably in your best interest. The benefits are that you will always know how much you owe each month and you don’t have to worry about the fluctuation in interest rates.
A lot depends on the interest rate. There may not be a big difference in what you pay while on an adjustable rate loan versus the fixed rate loan. However, there is a savings amount to always account. There is so much to factor here, so your best option is to check out our Internet calculator to see what loan is right for you or a lending adviser will also be able to help. We are happy to talk through your options with you and help you come to a conclusion that best suits your needs.
While adjustable rate mortgages and fixed rate mortgages are probably the most well known loan options,
there are other choices available to you. For example, if you are a Veteran, or if your income is quite low, there
may be a program that suits you. When you start to look around, ask about any discounts that may apply to
you. Think through the following:
Both the Veterans Administration and the Federal Housing Administration have loans available. The benefit to these is that you normally do not have to put down as much money on the house. For example, instead of the standard twenty percent, the FHA may only ask for three and a half percent. The VA may not ask for any down payment at all! Do your research and find out what you can.
In general, a mortgage loan lasts for thirty years. You are not tied to that, however. You can sign up for a 15 year loan if you want, or you may have the option to do something a little more than 15 years but a little less than 30 years. If you want to be debt free as soon as possible, a 15 year mortgage loan may be right for you.
To bring down the amount of money you pay each month, you need to buy points. A single point is one percent of your loan. Purchasing one can drop your interest rate by a quarter of a point. It is definitely worth looking into this more.
HARP stands for the Home Affordable Refinance Program, and it is run through the government. This program helps people lock in a low rate. You generally don’t have to have an appraisal or very much documentation at all.
Prodigy Lending is a DBA of AmCap Mortgage, Ltd. (NMLS ID# 129122 – www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/129122), an Equal Housing Lender.
Managing RMLO: Jason Turner (NMLS #286357)