Refinancing, put simply, is the process by which a homeowner looks to restructure their terms traditionally by either changing the length of a mortgage, lowering the interest rate, or taking equity out. There are two primary methods for refinancing home mortgages that we offer. These two options are rate-and-term refinancing and cash-out refinancing.
Rate-and-Term refinancing involves changing the interest rate of the mortgage, the term of the mortgage, or both without advancing any new money on the loan. This method for refinancing home mortgages is often considered to be the simplest and most straightforward because it does not increase the size of the loan.
When you choose rate-and-term refinancing through J.G. Wentworth, the aim is to lower your interest rate, which ultimately lowers your monthly payments and reduces the total amount you will pay for your home. While the popularity of rate-and-term refinancing is driven by dropping interest rates, you can also choose this option to shorten your mortgage term and pay off your home more quickly.
Rate-and-Term refinancing can also be used to reduce or eliminate the private mortgage insurance (PMI) payments that you may be making on your home loan, saving you money each month. For example, if you are paying PMI on an FHA loan, you can use rate-and-term to refinance into a conventional loan if you have reduced your loan-to-value (LTV) ratio to 78% or lower. Qualifying for refinancing into a conventional loan can be done by either paying your loan down to 78% LTV or by arranging a re-appraisal, which can increase the overall value of your home and decrease your loan-to-value ratio.
When you refinance your current mortgage with a larger mortgage loan and consolidate the two, it is referred to as a cash-out refinance. In this scenario, you will take out a loan for more than what you currently owe on your mortgage and pocket the difference between the two in cash, effectively taking equity out of your home in exchange for a cash advance. From there, you are free to use the money from a cash-out refinance on whatever you like, whether it be home improvement and repair, debt consolidation, education, or any other financial objective you have in mind. When you work with a leading direct lender like J.G. Wentworth, you can get a better interest rate than a credit card company would be able to offer.
Since cash-out refinancing increases the total loan amount, the qualifications may be more stringent than in the case of a rate-and-term refinance. Thankfully, J.G. Wentworth does everything in our power to get you approved no matter what kind of refinancing you are seeking. By manually processing your loan, our mortgage specialists are able to provide you with personalized service that lets us understand your full financial profile and give you the best chance for approval. Our manual underwriting process can be particularly useful when consolidating debt, as our underwriters can send the funds from a cash-out refinance directly to the account you wish to pay down.
While the reasons for refinancing home mortgages will vary according to each person’s unique circumstances, some of the most common goals for refinancing include:
- Lowering your mortgage payment
- Paying off your mortgage faster
- Getting a debt consolidation loan
- Removing Private Mortgage Insurance (PMI)
- Refinancing your home to get cash
- Switching loan programs (such as FHA to conventional)
- Earning more from an investment property
Our trusted home loan specialists at J.G. Wentworth work hard to get you approved for any of the refinancing options that we can offer.
Strike While Rates Are Low
Mortgage rates can change from one day to the next. Since these rates are one of the main determinants of what you pay on your home from month to month, it is important to understand how rates fluctuate, particularly if you are considering refinancing your home mortgage. By checking current mortgage rates online, you can see the rates available at the moment and compare them to what you pay on your mortgage right now. If you see that today’s rates are lower than the rate you are currently paying, contact J.G. Wentworth about refinancing.
Since the 2008 housing crisis, rates have been historically low, usually below 5%. To put that into context, consider the fact that rates in the 1980’s climbed as high as 18%. Given the ever-changing nature of mortgage rates in the United States, it is not unreasonable to think they may rise again, making right now an ideal time to refinance your home mortgage.
Refinancing When Rates Are Low
If you are considering refinancing your home mortgage, contact us to get in touch with one of our experienced home loan specialists so that we can get you on track to lowering your monthly payments. Call or click to start our simple online application process and get your free quote today!