By Matt Allen
Vice President, Portfolio Lending (NMLS #415037);

Should I Refinance My Home Loan?

Nov 05, 2019

  • Refinancing

The Time May Be Right for a Mortgage Refinance

You've had your home for a while, been steadily making payments on the mortgage, and have created a pretty sizeable amount of equity. Is the time right for a mortgage refinance?

There are a few reasons one might consider refinancing their home loan:

  1. You want to lower your monthly payment

  2. You want to pay off your mortgage quicker

  3.  You want to access cash  

Let’s examine these three possibilities and how it can save you money in the process.

Reason 1: You want to lower your monthly payment

If you are looking to have a little extra cash in your pocket at the end of each month, then refinancing to a lower interest rate may make sense for you. Before doing so, remember that there are often trade-offs (e.g. you may lengthen the term of your loan) so make sure to discuss your options with a loan officer first.

Do you current pay Private Mortgage Insurance (PMI)? If so, you could possibly have PMI removed with a refinance. Here’s how:

  • Jane bought a $150,000 house with a 3.5% down payment. This left her with a loan amount of $144,750. If a new appraisal confirms that her house is now worth $181,000, then she may qualify to have her PMI eliminated altogether because of the higher valuation on her house. This could potentially save her thousands of dollars over the years!

As you can see, a home that has appreciated in value may allow the borrower to remove PMI faster than initially planned. 

Reason 2: You want to pay off your mortgage quicker

Let’s say you are currently financing your home with a longer-term mortgage, but want to pay off your home quicker.  You can refinance your home into a shorter-term mortgage with a lower interest rate, which could save you thousands of dollars in interest. For both reason 1 and reason 2, this type of refinance is known as a rate and term refinance.

Reason 3: You want access to cash 

You can refinance your house and take the cash to pay off whatever expenses you may have.  Borrowing from the example above, a cash-out refinance would look like this:

  • Jane bought a $150,000 house and currently owes $80,000 on it. The house has retained its value. She can then borrow up to 80% of the home’s current value and take cash for the difference, and use it as she wishes.

The above are the most popular reasons for why someone might consider refinancing their loan. Should you refinance your house?  If any of these situations apply to you, then it may be a good solution!  Here's a calculator that can you determine if refinancing your home can benefit you. The best way to find out if you should refinance your home is to call NASB at 855-465-0753 and learn more about the refinancing process.  You may have more options available to you than you realize.  Call us today to find out more!