Refinancing is when you replace your existing mortgage with a new mortgage. The reason behind refinancing varies depending on you are trying to accomplish. You might be trying to lower your payment, lower your interest rate, obtain cash out, shorten the term of your loan, etc.

You may have equity in your home that you would like to tap into. You may be able to access this extra cash and lower your current monthly mortgage payment. This dream can become a reality through mortgage refinancing. A house is the largest asset you may ever own. Likewise, your mortgage payment may be the largest expense you'll have in your monthly budget. Wouldn't it be great to use this asset to reduce your monthly payment and put extra cash in your pocket? When you refinance your mortgage, you can take advantage of the equity in your home and enable this to take place.

When you purchased your home, the financial environment dictated what interest rate you received. Other factors, like your credit score and the amount of the down payment that you were able to afford, also affected your interest rate. The most important factor was the prevailing rates at that point in time. Interest rates fluctuate. If you are wondering how your rate compares to the rates that are being offered today, please contact us. Refinancing your mortgage when interest rates are lower, you can exchange a higher interest rate for a lower one, which, in turn, will lower your monthly payment. Keep in mind that this usually means that your term is reset to a new 30 year mortgage. If this is a point of concern for you, please keep reading.

Another advantage of home refinancing is that you can shorten the term of your mortgage. Let's say, for example, that you originally had a 30-year mortgage and have been paying it for eight years. Thanks to mortgage refinancing, you can switch to a shorter term of either 10, 15, 20 or 25 years. This can save you thousands of dollars of interest. Also, if the refinance rate is lower, but you maintain the same monthly payment, you will build up equity in your home more quickly, because more of your payment will be going towards principal.

When interest rates are low, adjustable rate mortgages (ARMs) are the hot ticket! However, as interest rates increase, that adjustable rate may not look as tempting. It's also possible that you opted for an ARM because your financial future was less secure, or you weren't sure how long you'd stay in your home. If, however, these unknowns are now clear, it may be a good time to find out what your options are. You'll have more security knowing that your monthly payment will remain steady, regardless of the current market environment.

One way to put more money in your pocket is to tap into the equity you've built in your home and do a "cash-out" refinancing. In this scenario, you can refinance for an amount higher than your current principal balance and take the extra funds as cash. This can provide money for remodeling your home, paying off high-interest rate bills, or sending your kids to college.

What if you have very little equity?

There still my be a chance that you can take advantage of today's low interest rates!  Fannie Mae (Refi plus) and Freddie Mac (Open Access) both offer special refinance programs for situations like this.  They will allow us to provide a refinance as long as you aren't too underwater.  Currently the programs both allow for your new loan amount up to 105% of the value of your home.  This type of program is only allowed if your current loan has Fannie Mae or Freddie Mac as an investor.  Contact us for more details!