Refinancing your home mortgage is a great way to reduce your monthly mortgage payments. Your initial home mortgage is borrowed at a specific interest rate. There are times during market fluctuation when lower interest rates are available. With qualified equity and credit status it is possible to reduce your existing mortgage payments by refinancing.
A refinance loan is an entirely new loan that is used to pay off your previous mortgage balance at a new, lower annual percentage rate (APR). It is important to make sure the APR with the new loan is lower than the one you previously had, otherwise you are not saving anything and can actually incur more debt.
Refinancing also potentially provides new money for home improvements, debt consolidation and more.
Even though it is an entirely new loan, its application and eligibility process requirements are similar to those in a traditional mortgage loan.
Due to equity built up in your home at the time you choose to refinance, however, more options and friendlier terms might be available to you.
Some of those benefits include a cash-back option, allowing you to refinance your mortgage for lower monthly payments in addition to receiving some of the equity back in cash. This is particularly good if you need a large amount of cash in a fairly quick time.
APRs for refinance loans as reported in 2023 ranged from 5.71 to 7.18 percent. Loans are available with fixed APRs, 7/1 adjustable-rate mortgage (ARM) and 10/1 ARM APRs. Fifteen and thirty-year refinancing terms are also available.