The two most common options for refinancing are lowering your rate and getting cash out of your equity. Below are a few examples.
Rate and Term Refinancing
Example: If you have been paying on your loan for 15 years and had a 30 year fixed rate, then putting you into a new 15 year loan with a lower rate could save you tens of thousands over the next 15 years.
VA, FHA, and USDA all offer no appraisal, low cost, streamlined Rate and Term reduction loans. These are awesome if this is the type of loan you currently have and you do not want to obtain cash out on your equity.
Cash-Out Refinancing
Example: You have a loan balance that you have been paying down for quite some time, so the equity is there to obtain funds for paying off debt, thus reducing your total out of pocket expenses, and although increases your loan balance and monthly payment, the interest on your home is a tax write off, and the interest on credit card and car loans is not deductible. I am not a CPA, and tax laws change, so always talk to your tax advisor about tax deductions, but it could make financial sense. Let me go over the numbers with you, if it doesn’t make financial sense, I will tell you honestly and transparently.
Example 2: you owe $275,00 on your home, and it’s worth over $400,000 now, but you have a kitchen and bathrooms that need updating and you wish to put some money into remodeling. If you wanted to take out $45,000 for those two projects, then the new loan would go to $320,000 providing the cash to do the work on the house. Taking out separate loans from credit card companies, home improvement stores or personal loans are not usually the answer. The rates are typically higher and the terms to pay it off are shorter than with a home loan and 30 year fixed terms, so the new additional costs should be less with the cash-out refinance. Again, if this doesn’t make sense, I will let you know. Or, if another option is better, even if I do not do the loan for you, I will tell you honestly and transparently. I want your trust, it means a lot to me.