Refinancing can be an effective way to lower your monthly payments, but it can also be used for other reasons, such as paying off debt, financing improvements to your home, etc.
When refinancing you should:
• Review your financial picture
• Evaluate your short-term and long-term goals
• Consult a tax or financial planning professional
Although there are different loans that can help you lower your payment, the right decision depends upon your current situation and your short and long-term goals.
Review your financial picture
Do you want to only lower your monthly mortgage payments or do you want to lower or eliminate revolving debt? Do you need to finance home repairs or invest in your child’s education? Some homeowners choose to refinance a home loan in order to lower their mortgage payments. Others choose to refinance to consolidate debt and get cash for needed expenses.
Evaluate your short-term and your long-term goals.
Circumstances change over time and your short-term goal may be to lower your payments while your long-term vision involves something entirely different. You need to determine your short-term and your long-term goals to see whether refinancing a loan can help you meet them.
Lowering Your Interest Rate
What Affects Home Loan Rates?
There are many factors that affect not only the ability of a customer to qualify for a loan, but also the rate they may be offered. Some important factors include:
Credit and Payment History
Paying your bills on time is very important. Late payments will affect both your ability to qualify for a loan and the interest rate offered.
Your monthly debt obligations divided by your income provides your debt-to-income ratio. If the amount of your income that is required to pay existing bills is high, this means that you have less money available to take on new debt or pay for day-to-day expenses and emergencies. Loan programs often include a maximum “DTI” ratio that a borrower cannot exceed because higher ratios increase loan risk.
Loan Amount vs. Property Value
The percentage of the loan amount to your property value (loan amount divided by the property value) is the loan-to-value ratio. The “LTV” ratio can affect a borrower’s interest rate and his/her ability to qualify for a loan.
There are other factors that may affect the rate you are offered, including but not limited to:
- Property Type (single family, multi-family, condominium/townhouse, attached, detached)
- Occupancy (primary residence, second home, investment property)
- Property Condition
- Market Conditions
- Loan Amount
GET CASH OUT
Can I Use the Equity in My Home to Remodel?
Some customers with equity may qualify to refinance their mortgage and access available equity to finance a remodel or home improvement. Find out if you qualify, or contact Carlton, your Mortgage Professional to learn more.
Can I Use the Equity in My Home to Get Access to Cash?
Refinance programs that include the ability to get cash out have become more limited, though some well-qualified customers with available equity may be able to access cash through a refinance. Find out if you qualify, or contact Carlton, your Mortgage Professional to learn more.