Should I Refinance My Mortgage?


The most popular reason to refinance your home is to lower the mortgage interest rates but there are actually several different reasons for someone to look into refinancing. Below, we are going to highlight some of the benefits of refinancing your loan.

Refinancing: High-Interest Rates

If your current interest rate seems like it might be high for the current market, definitely check with a Loan Officer and see what you could lower your interest rate too.

Rate fluctuation is common and sometimes unpredictable. It is definitely worth checking your current interest rate if you aren’t sure what it is and consulting with one of our loan officers to see if this could benefit you. There are a lot of factors that go into getting the best mortgage rate available, including your credit score, loan program, equity in your home, and debt-to-income ratio.

Should I refinance my mortgage in Missouri, Arkansas, Illinois, and nearby areas

Refinancing: Removing PMI

If you are paying PMI (private mortgage insurance) on an FHA or Conventional loan, you can look into refinancing to remove the PMI even if you don’t have 20% equity. This will remove the monthly PMI from your loan payments and free up your monthly income for other things. If you put less than 20% down on a Conventional mortgage when you initially took out the loan you could potentially still be paying monthly PMI. For FHA, if you put less than 10% down when you bought your home that mortgage will always have monthly mortgage insurance. If you put 10% or more down when you bought the property, but it’s been less than 11 years since you took out the loan, then you would also still be carrying it.

Refinancing: Streamline Loans

If you currently have an FHA, USDA, or VA loan, you might be eligible to refinance it into one of their streamline programs. These are only available for these types of home loans and typically require less documentation than the previous loan. Most of these home loans qualify for an appraisal waiver to help keep the cost down.

Refinancing: Built-Up Equity

If you have some equity in your mortgage loan (this means you currently owe less than what your home is worth), then you can sometimes do a cash-out refinance. This would give you a lump sum of cash at closing that can be used to pay off other debts, such as credit cards, installments, etc., or you can also decide to upgrade or make repairs to your property. There are different kinds of cash-out refinance options, so make sure you talk to your Loan Officer and let them know what you would want to use the cash for.

Refinancing: ARM vs. Fixed Rate Loans

If you currently have an Adjustable Rate Mortgage (ARM), then your interest rate is set for a certain period, and once that period ends, it adjusts at set intervals. For example, a 5/1 ARM would have a set interest rate for the first 5 years and at the end of the 5 years, adjust to a new rate on an annual basis for the life of the loan. ARMs typically have a lower initial interest rate than a fixed-rate mortgage because you are taking on the risk of the rate increases after the first term ends. It’s always a great time to look at refinancing an ARM into a fixed-rate mortgage to see if it makes sense.

A lot of the time, refinances require less documents than the previous mortgage loan since you have already been approved in the past. It depends on the loan program and what you are eligible for. Something else that refinances sometime offers are Property Inspection Waivers, or PIWs. This is a document that is signed in place of an appraisal being done, which can make the file able to close sooner and take the fee of the appraisal out of the loan. Every loan is different and completely dependent on the borrower’s personal financial situation, but if any of these benefits seem like they might apply to you, reach out to a Loan officer today to see what they can do for you. Even if you aren’t sure if any of them do, it never hurts to have them run some scenarios with you. Refinancing is all about saving you money in the long run and freeing you up to meet your other financial goals.

FAQs for Should I Refinance My Mortgage?

How can refinancing lower my mortgage interest rate?

Refinancing to a lower interest rate can reduce your monthly mortgage payments and the total interest paid over the loan’s life. It’s beneficial to consult with a loan officer to compare your current rate with the prevailing market rates and determine potential savings.

Can refinancing help me remove PMI?

Yes, refinancing can help you remove Private Mortgage Insurance (PMI) if you currently have an FHA or Conventional loan. This is possible even if you don’t have 20% equity, potentially lowering your monthly payments and freeing up income for other expenses.

What are streamline refinancing programs?

Streamline refinancing programs are available for FHA, USDA, and VA loans, requiring less documentation and potentially offering appraisal waivers. These programs simplify the refinancing process, making it quicker and more affordable for eligible borrowers.

How can I use built-up equity in my home through refinancing?

A cash-out refinance allows you to tap into your home’s equity, providing a lump sum of cash that can be used for various purposes such as paying off high-interest debts, making home improvements, or meeting other financial needs. Discuss your goals with a loan officer to determine the best use of your equity.

USA Mortgage Abadi Region

USA Mortgage Abadi Region

A full-service mortgage lender with local branches in Missouri, Arkansas, Illinois, and nearby areas.