Some families also use what is called a cash-out refinance. In this case the homeowner would take out a new loan large enough to cover the first mortgage with enough left over to cover another large expense. The extra amount borrowed is based on home equity. Home equity is the value of your home that you own, in other words, the worth of your home above and beyond the mortgage that you owe. If your home would sell for $150,000 and your mortgage is 100,000, you have 50,000 in equity. Many lenders will allow you to borrow up to 85% of your equity.
Refinancing is in the simplest terms possible, the act of replacing your current loan with a new loan, which is why it gives you the opportunity to use your previous experience obtaining a loan to find the one that is right for you.
After the first couple of years some homeowners discover that their home mortgage is not as good as they originally thought. Some families realize that they need the stability of a fixed rate loan, or see that what seemed like a low interest rate is no longer impressive compared to current rates. Others realize that a fifteen year mortgage results in monthly payments too high for them to meet or that a thirty year mortgage doesnt build equity quickly enough. For homeowners in this type of position, mortgage refinancing is the perfect way to obtain the right loan.
With interest rates at all time lows, many homeowners are looking into mortgage refinancing. If interest rates have fallen 2% or more since you closed your mortgage, refinancing may save you a lot of money. Take a moment to fill out our free short form and contact up to four lenders about refinancing your mortgage.