Refinancing your home mortgage is essentially replacing your current mortgage with a new one, but with terms that could be more favorable for you.
What is Refinancing?
You could refinance your home to receive a lower interest rate which would lower your monthly payment, adjust the term of the loan so you would pay off your mortgage in a shorter amount of time, or refinance to take cash out on your home. There are many different ways to refinance your home loan, three of the most common refinances are an FHA streamline refinance, cash-out refinance, and rate-and-term refinance. Let’s go into more detail on what those are-
FHA Streamline Refinance
An FHA Streamline Refinance is an option for those with a current FHA home loan and it is usually faster and easier than other refinancing products. It requires less verification such as income, employment, and credit information. FHA Streamline Refinances also forgo a home appraisal because the home value is based on the original purchase price of your home. FHA Streamline Refinances can be used to get a lower interest rate than your current one, which would result in a lower monthly mortgage payment and more money staying in your pocket.
If you’re currently paying mortgage insurance, this refinance option could also help you drop the extra cost and increase your cash flow each month. If the amount that you have already paid towards paying off your home loan is 20% of the purchase price, you would be eligible to drop your mortgage insurance and refinance your home loan into a Conventional home loan because you own 20% or more of the home. Or the minimum down payment amount which does not require you to pay mortgage insurance.
With a Cash-Out Refinance, you can still adjust the rate and term of the loan, however, the key factor to this product is taking advantage of the equity that had built up in your home and exchanging it for cash. For example, if your home is worth $500,000, but you owe $400,000, you have built up $100,000 in equity and can take that portion away in cash. The cash can be used for home improvements, education expenses, caring for a loved one, an emergency fund, and more.
A Rate-to-Term Refinances are simply what they sound like. They allow you to refinance into a home loan with a different interest rate or a different term of the loan. For instance, if you have the option to refinance and get a lower interest rate than your current rate, you would benefit because you’re lower interest rate would mean a lower monthly mortgage payment. Refinancing can also let you change the term of the loan. For example, if you are able to pay off your mortgage in less time than what the determined term is, you could refinance to shorten the loan term.
What have Mortgage Rates been up to in 2019?
Rates are at a very interesting place at the moment. Mortgage interest rates were estimated to be in the 5 percent this time of year, however, the current rates are about a whole percentage point lower than predicted.
A couple of factors play into this unexpected outcome. President Trump has been putting the pressure on the Fed to keep rates low. And in August the Fed lowered rates, this is the first time since 2008 that the Fed has reduced rates. And the Fed may lower rates again after the next meeting that is held later this month. Trade wars can also cause rates to lower. The trade wars between the U.S. and China, two countries with the strongest economies in the world, can decelerate economies and lower rates.
Last but not least, you’ve probably heard something about a yield curve. A yield curve is a curve on a graph that is a good predictor of economic behavior. Currently, the curve is inverted, which is an indicator of a recession and consequently low rates and low rates to come.
What do Low Rates mean for Homeowners in Seattle?
It seems to be a constant debate for homebuyers whether now is a good time to buy or refinance or to wait to see what the market does. It’s difficult to know exactly where the market will go, however, a professional mortgage lender feels confident that rates will stay low for the rest of 2019. The best time to refinance is when mortgage interest rates are lower than your current interest rate.
With rates at historic lows, it could be a good idea for Seattle homeowners to refinance your home mortgage if you have been thinking about it. Refinancing your home loan with the current rates could mean a huge difference between your current rate and what your new rate would be. And a lower interest rate could save you hundreds of dollars each month and thousands over the life of the loan. A lower interest rate could also help you pay off your mortgage in Seattle or build up equity in your home faster than your current home loan.
Could Refinancing your Seattle Home Mortgage be right for you?
Before refinancing, make sure it’s the right thing for you. Calculate how much it would take to refinance versus how much you would be saving and compare the difference to make sure it is worth it for you and your financial situation. The local experts at Sammamish Mortgage are happy to share their knowledge of the real estate market and discuss your refinancing options. Contact Sammamish Mortgage today!