Mortgage Loan
Refinancing


What is Mortgage Refinancing?

There are times when it is actually better to refinance a mortgage. However, it is very important for the homeowner to have a clear understanding of all financial objectives desired from refinancing, and to consider these objectives during the loan selection process. Ultimately, it is up to the homeowner to decide which loan is based for their unique financial situation. Equity Source Mortgage will walk you through this important process.


*The following is only general information and will not apply to every person’s situation. To learn how mortgage refinancing could work specifically for you, call Equity Source Mortgage at 763-657-2000.

Should I Refinance My Mortgage?

Before deciding whether to refinance your mortgage, think about your long term goals. Why are you refinancing? Will refinancing help you save more money month to month? Do the benefits outweigh the possible pitfalls? At first glance, mortgage refinancing can seem like the answer to the problems of some homeowners who want to reduce their monthly mortgage payments. However, mortgage refinancing is not a silver bullet solution to mortgage issues, and could create more problems than it solves.

When homeowners refinance, they generally do it for a few reasons: 1) Reduce the interest expense. 2) Expand the life of the loan. 3) To consolidate debt. 4) To get out of an adjustable rate mortgage (ARMs).

If homeowners have both a mortgage and home equity loan, they can combine the two loans into one fixed-rate mortgage which only requires one payment to be leveled out over the course of the loan term. Other homeowners refinance in order to get out of an ARMs. People choose an ARM when interest rates on fixed-mortgages are high, as adjustable rate mortgages are low. But when fixed-rate mortgage interest rates are low, many consumers want to be locked into the low interest rates that a 30-year fixed-rate mortgage can provide.


When to Refinance My Home

Before deciding to refinance your mortgage, determine if the timing and circumstances are right. People who choose mortgage refinance are planning on remaining in the property for an extended amount of time. Refinancing to reduce the monthly payments, will add more time to your stay at the residence. Also those who refinance to obtain lower interest rates and extend the length of the mortgage, wind up spending more in interest over time.

If you simply desire smaller monthly payments via a lower interest rate, or extension of the loan period, then mortgage refinancing may be for you. Also refinancing to get out a an undesirable mortgage like an interest only mortgage, or ARM can also a legitimate reason if the interest rates make the monthly mortgage payments unbearable.


When Not to Refinance

If you do not plan to stay in your current home for an extended length of time, then refinancing is not a practical decision. Also if you currently owe more money than your home is worth, you should avoid refinancing. Still you might be able to under the Home Affordable Refinance Program (HARP).


The 2 Types of Mortgage Refinancing Options

There are two main types of refinancing: cash-out or “plain vanilla.” With cash-out refinancing, homeowners can take out a new mortgage on the same home, but the amount borrowed is higher than the amount of the first mortgage and the difference is paid out in cash. The cash can then be used by the owner to pay debts for example.

A “plain vanilla” refinancing replaces your current mortgage with one that has a lower interest rate. This type of refinancing typically has lower interest rates than cash-outs and there is no noticeable increase in mortgage debt.


Equity Source Mortgage

Navigating mortgage and loan rates is complicated! Why not let our team do the hard work for you? Equity Source Mortgage is a trusted mortgage broker in Minnesota. We believe that people deserve a home to call their own. At Equity Source Mortgage, our number one goal is to match you with the best loan for you. Contact us or call us at 763-657-2000 to begin exploring your home ownership journey – YOUR Dream Is Calling!