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Comparing Home Refinancing Options for Every Situation

refinance options for your lifestyle and needs

While mortgage rates have been trending higher, that doesn’t mean refinancing is off the table for everyone. There are many home refinancing options besides lowering your interest rate, though even that may still be possible.

If you want to eliminate private mortgage insurance, tap into home equity, restructure the length of your loan term, or switch between fixed and adjustable-rate loans — a home loan refinance is worth considering.

What’s right for your financial situation? Take a look at some of the choices you have when refinancing your mortgage, and see what’s the best fit.

Looking for the lowest monthly payment?

Lower monthly payments are one of the most common reasons for home loan refinancing. Depending on your current loan program and the market, there are a few refinance loan types at your disposal that may provide you with a lower monthly mortgage payment.

Adjustable rate mortgage (ARM)

Reap the immediate benefit of a lower rate when choosing an adjustable rate mortgage. It’s a popular loan option among homeowners who are not looking to stay in their home for too long or homeowners who are expecting a raise or promotion in the near future.

Keep in mind; there is a long-term risk of fluctuating rates and payments once the fixed-rate period ends. So if you do not have a move planned, be prepared to refinance should interest rates increase.

Rate and term refinance

Another option to lower your monthly payment is to consider a rate and term refinance. It’s an easy, fast-tracked way to a new loan program with greater monthly benefits.

Rate and term refinances can carry lower interest rates than cash-out refinances. The lower your interest rate, the less you pay on your mortgage (both monthly and overall).

Tip: If you’re currently in an FHA loan, consider an FHA streamline refinance. It’s an ideal program because there’s no minimum credit score required, no appraisal or income verification needed, and more!

Want to spend the least amount on interest?

Every month you pay your mortgage principal (the amount you’ve borrowed) plus the interest accrued for the month. The longer you take to pay off your mortgage, the more you will spend because you’ll be paying interest for a more extended period of time. So, if you’re looking to spend less on interest over the life of your loan — shorten the term! It’s an effective home refinancing option that can save you tens of thousands of dollars.

Tip: Learn more about amortization by reading our mortgage payments explained article.

Be sure to research lenders before committing to the traditional 15-year loan. There are some companies, like American Financing, who can refinance your mortgage to any term you need: 20, 18, even 13-year terms. Choosing a custom term can save you even more on interest.

Need money for a significant expense?

College tuition expenses on the horizon? Looking to complete a much-needed home remodeling project, or even purchase a new home or investment property? Maybe you’re struggling with an unplanned medical expense, or high-interest credit card bills that continue to add up? If you’re in need of a significant amount of money, look no further than your home. As your home value grows, so does its equity — and equity can be easily accessed through a cash-out refinance.

Simply put, a cash-out refinance replaces your existing mortgage with a new home loan for more than you owe on your house. The money received can be used however you’d like, including all of the expenses mentioned above and more.

Tip: Loan amount maximums have increased on conventional and government loan products allowing you access to more equity, meaning there’s more cash available for your needs.

Interested in consolidating high-interest debt?

Debt can bring up an overwhelming number of feelings — from anxiety to helplessness, maybe even ignorance. No matter how much debt you have, you need to remember you are not your debt. So face the numbers and create an action plan to get out of it because that interest will really add up over time, especially when credit card rates are near 17%.

Instead, make a greater impact by consolidating your debt. Your refinance rate will likely be lower than the rates you were paying, and you get to consolidate your bills into one manageable monthly mortgage payment. Mortgage interest is usually tax-deductible as well.

Tired of paying mortgage insurance?

Typically, borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance. It can run a couple of hundred dollars a month, sometimes more.

If you have a conventional loan and are paying private mortgage insurance or PMI, it can be removed once you have at least 20 percent equity in your home. You can choose to refinance out of it, or you can ask the lender to cancel PMI when you have paid down the mortgage balance to 80 percent of the home’s original appraised value. When the balance drops to 78 percent, the mortgage servicer is required to eliminate PMI.

Government-backed loans, on the other hand, do not allow mortgage insurance to be canceled. So if you have an FHA loan, the only way to eliminate mortgage insurance is to refinance into a non-FHA-insured loan.

Has your credit score improved?

Credit scores directly impact mortgage interest rates. Just 100 points could cost, or save, you thousands. If you’ve owned your home for a few years, you may have a better credit score now compared to when you originally qualified for a mortgage. You also may have built up a healthy amount of equity in your home. Either one or both of those developments could help you qualify for better mortgage terms than when you first bought the house.

Tip: Let us help you better understand what makes a good credit score for a low mortgage rate.

Recently divorced?

Nearly half of U.S. marriages end in divorce, so it’s important to know what to do with the marital home should this happen to you. Of course, you can agree to the sell the house, but what if you want to stay? Assuming you can afford the mortgage payments on your own, you are able to refinance the mortgage to remove your ex-spouse’s name from the title. After the refinance closes, only the person whose name is on the mortgage would be responsible for making the monthly payments.

Tip: a quitclaim deed is commonly used to remove a spouse’s name from the title in a divorce.

Mortgage refinance calculator

Prefer to further research home refinancing options before calling a mortgage consultant? Give one of our mortgage refinance calculators a try.

  • You can decide if you should refinance and save money by comparing your original home loan, interest rate, term length, and monthly payment.

Ready to start your home loan refinance?

At American Financing, we provide a consultative approach with no upfront costs. We have access to every loan in the industry, too, so you can feel confident you’re receiving the right home refinancing options for your needs. Schedule an appointment online for a free mortgage review, or give us a call today (800) 910-4055.