You may be able to refinance your home loan to lower your monthly payments. Debt consolidation may simplify your finances by combining higher interest credit card payments into one convenient payment and potentially saving you money on monthly interest payments. If you refinance your existing loan, your total finance charges may be higher over the life of the loan.

Before you refinance a home to lower payments it's a good idea to:

• Review your entire financial picture
• Evaluate your short- and long-term goals
• Consult a tax or financial planning professional

There may be a number of different loans that can help you lower your payment; the right decision depends upon your current situation as well as your short- and long-term goals.

Review your entire financial picture

Do you want to only lower your monthly mortgage payments or do you want to lower all of your bill payments? Do you need to finance home repairs or college education in the near future? Some homeowners choose to refinance a home loan solely to lower the mortgage payments. Others choose to refinance to consolidate debt and get cash for needed expenses.

Evaluate your short- and 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- and long-term goals to see whether refinancing a loan can help you meet them.

Finance a major purchase with a cash-out refinance. This option is popular with customers who have built equity* in their homes. This may provide the option to borrow against their home’s available equity to pay for other expenses. For example, if you’d like to add a garage, swimming pool, or additional rooms, a cash-out refinance can fund a project that can make your home more comfortable.

Other ways to utilize your home’s equity include:

• Education - A cash-out refinance could help pay for school or college tuition for your children or yourself.
• Remodel - The proceeds from a cash-out refinance could help you update one or more rooms in your home, such as the kitchen or bathroom.
• Purchase - You may choose what to finance with the proceeds. For example, if your family needs a new car, you could use the funds from your refinance to purchase one.

*Equity is the amount repaid on a mortgage, adjusted for any rise or fall in the home’s value, and with any additional liens subtracted.

What affects mome 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:

How can I lower my mortgage payments?

Refinancing into a new loan with a lower interest rate or a longer term may help reduce your monthly mortgage payments. However, the overall savings will depend on several factors, including current market rates, loan terms, and your credit profile.

Should I refinance?

Refinancing can serve a variety of purposes, such as lowering your interest rate, switching from an adjustable-rate mortgage to a fixed-rate loan, accessing home equity for major expenses like home renovations or education, or consolidating multiple loans into one.

Everyone's financial situation is unique, so it's important to evaluate your goals and circumstances before making a decision. A licensed mortage professional can help assess whether refinancing aligns with your financial objectives.

How much can I save if I refinance?

Mortgage interest rates fluctuate frequently and may differ from when you initially purchased your home. If current rates are lower than your existing mortgage rate, refinancing could reduce your monthly payments and total interest paid over the life of the loan.

However, savings depend on various factors, including your current loan terms, credit profile, and associated refinancing costs. It's important to compare potential monthly savings with closing costs to determine if refinancing is the right financial move.

Can I still refinance if I have a second mortgage?

It may be possible to refinance your primary mortgage even if you have a second mortgage on your home. However, doing so often requires coordination with the lender holding the second loan. This may involve subordinating the second mortage, meaning the second lienholder agrees to remain in a junior position after the refinance.

When refinancing, borrowers typically encounter standard closing costs. There may include third-party fees such as those for the credit report, title services, notary, escrow, appraisal, and recording. Lender fees like processing or underwriting may also apply.

Additionally, some borrowers choose to pay discount points to potentially reduce their interest rate. One point typically equals 1% of the loan amount. Prepaid items such as property taxes, and homeowner's insurance may also be collected at closing.

Depending on the loan type and your home equity, some of these costs may be rolled into the new loan amount. It's important to discuss your specific situation with a licensed mortage professional to understand your options and total costs.

What type of documentation do I need for refinance?

When applying for a refinance, you may be asked to provide documentation similar to that required for a standard mortgage loan. This often includes:

• Proof of income, such as recent pay stubs (typically from the last 30 days)
• W-2 forms and tax returns from the past two years
• Bank statements or investment account summaries from the last 60 days
• Your most recent mortgage statement
• A copy of your homeowner's insurance declarations page

Depending on your loan type and financial profile, the lender or underwriter may request additional documents during the review process. For some loan types, alternative documentation of income may be acceptable which would not include all of the above.

Can I refinance with bad credit?

Refinancing may be possible even if you have less-than-perfect credit, but eligibility will depend on several factors - including your current credit profile, equity in the home, income, and debt-to-income ratio. Some loan programs are designed to assist borrowers with credit challenges, though terms may vary.

To explore your options, consider speaking with a licensed mortage advisor who can review your situation and help determine what programs you may qualify for.

Is it true that you should only consider refinancing if you can lower your rate at least .5%?

There is no single threshold that applies to everyone. While lowering your interest rate by at least 0.5% can make refinancing more worthwhile in some cases, many other factors could make a refinance beneficial. For instance, switching from an adjustable-rate (ARM) to a fixed-rate loan could offer more predictable payments, even if your monthly payment increases slightly.

In some cases, there may be refinance options available with reduced upfront costs, depending on your qualifications and the lender's terms.

It's best to review your financial goals and current mortgage terms with a licensed mortage advisor to determine whether refinancing is a smart choice for your situation.

What is a cash-out refinance?

A cash-out refinance allows you to replace your existing mortgage with a new loan that is larger than what you currently owe, using the equity you've built in your home. The difference between the new loan amount and your remaining mortgage balance is provided to you as cash, which you can use for various purposes such as home renovations, education expenses, debt consolidation, or other major purchases.

This option may increase your overall loan balance and monthly payments, and it's important to evaluate whether it aligns with your long-term financial goals.

How often can I refinance my home?

While there are typically no legal limits on how often you can refinance, lenders and loan programs may have specific requirements such as minimum seasoning periods or guidelines for cash-out transactions. Your mortgage advisor can explain any applicable restrictions based on your loan type and lender policies. The most important factor is whether refinancing supports your financial goals. Consider questions such as:

• Will you secure a lower interest rate?
• How much equity have you built in your home?
• Does your current mortgage have a prepayment penalty?
• How long do your plan to stay in the home?

Carefully evaluating these factors with a trusted advisor can help determine if refinancing is right for you.

How long is the refinance process?

If you are able to provide all the required documentation that is needed in a timely manner, we should be able to close your refinance loan in a little over 30 days.

What happens at the loan closing?

The closing process can vary depending on your state. In some locations, you may need to attend the closing at a designated site, such as an escrow or attorney's office. Other states may allow you to sign documents at home with a certified signing agent.

During the appointment, you will review and sign all loan documents in the presence of the signing authority. If you've choosen to roll your closing costs into your loan, no additional payment is required. Otherwise, you'll to bring a certified or cashier's check to cover the applicable closing fees.

Note: “No closing cost” is a marketing term not allowed in the state of Washington. However, including your closing costs in your new mortgage or paying them separately is allowed in all states.