If you want to lower your interest rate, we may be able to help you find a loan that meets your needs and lowers the amount you pay in interest over the life of your loan.
Credit & Payment History
Making timely payments on your debt obligations is very important. Late payments can greatly affect both your ability to qualify for a loan and the interest rate offered.
Your monthly debt obligations divided by your income provides your debt-to-income ratio. The higher the ratio, the higher the loan’s risk, as the percentage of your income already required to pay existing bills is high. You have less money available to take on new debt or pay for day-to-day expenses and emergencies. Loan programs often include a maximum “DTI” ratio that a borrower cannot exceed.
Loan Amount vs. Property Value
The percentage of the loan amount to your property value (loan amount divided by the property value) is the loan-to-value ratio. The “LTV” ratio can affect the ability of a borrower to qualify for a loan and the interest rate they receive.
Among other factors that may affect the rate you are offered are:
- Property Type (for example, single- or multi-family, detached or condominium/townhouse)
- Occupancy (whether the property is your primary residence or not)
- Property Condition
- Market Conditions
- Loan Amount
You may be able to refinance your home loan to lower your monthly payments. Debt consolidation may simplify your finances by combining higher interest credit card payments into one convenient payment and potentially saving you money on monthly interest payments.
Before you refinance a home to lower payments it's a good idea to:
- Review your entire financial picture
- Evaluate your short- and long-term goals
- Consult a tax or financial planning professional
There may be a number of different loans that can help you lower your payment; the right decision depends upon your current situation as well as your short- and long-term goals.
Review your entire financial picture
Do you want to only lower your monthly mortgage payments or do you want to lower all of your bill payments? Do you need to finance home repairs or college education in the near future? Some homeowners choose to refinance a home loan solely to lower the mortgage payments. Others choose to refinance to consolidate debt and get cash for needed expenses.
Evaluate your short- and long-term goals
Circumstances change over time and your short-term goal may be to lower your payments while your long-term vision involves something entirely different. You need to determine your short- and long-term goals to see whether refinancing a loan can help you meet them.
Finance a major purchase with a cash-out refinance. This option is popular with customers who have built equity* in their homes. This may provide the option to borrow against their home’s available equity to pay for other expenses. For example, if you’d like to add a garage, swimming pool, or additional rooms, a cash-out refinance can fund a project that can make your home more comfortable.
Other ways to utilize your home’s equity include:
- Education - A cash-out refinance could help pay for school or college tuition for your children or yourself.
- Remodel - The proceeds from a cash-out refinance could help you update one or more rooms in your home, such as the kitchen or bathroom.
- Purchase - You may choose what to finance with the proceeds. For example, if your family needs a new car, you could use the funds from your refinance to purchase one.
*Equity is the amount repaid on a mortgage, adjusted for any rise or fall in the home’s value, and with any additional liens subtracted.
What Affects Home Loan Rates?
There are many factors that affect not only the ability of a customer to qualify for a loan, but also the rate they may be offered. Some important factors include:
How Do I Lower My Payments?
Refinancing can be an effective way to lower monthly payments.
Should I refinance?
Everyone’s situation is different. Take a look at yours and determine your reasons for wanting to refinance. Do you want to lower your interest rate? Want to switch from an adjustable rate mortgage to a fixed rate mortgage? How about cashing out some of your equity to remodel, fund tuition bills or a long awaited vacation? Or you could want to combine your two mortgages into one. While everyone’s reasons are different Bridgeway Financial is here to help you.
How much can I save if I refinance?
Mortgage interest rates change often. Chances are they are different from when you first purchased your home. If your rate is higher than what is currently on the market, it probably makes sense to refinance. Why pay more than you have to?
Can I still refinance if I have a second mortgage on my home?
While fees vary from lender to lender there are standard fees that are typical. Third party fees such as credit report, escrow, notary, title and recording fees are amongst them. Appraisal fee and lender fees, such as those in processing and underwriting, are also incurred. If you decide you would like to pay points to lower your rate further, the cost of each point you pay equals 1% of your new loan amount. Outside of the closing fees, there are also prorated pre-paid costs for items such as property taxes, interest and homeowners insurance. All fees and prepaid items can be added to your new loan if you have enough equity in your home.
What type of documentation do I need for refinance?
A refinance loan requires similar documentation that you provided in your first mortgage loan. Your mortgage advisor will request information regarding your income such as paystubs for the most recent 30 days, W-2’s and tax returns for the previous 2 years, bank or mutual fund/stock statements for the last 60 days. You will also be asked to provide your most recent mortgage statement and homeowners insurance declarations page. Upon the underwriter review you may be required to provide additional items.
Can I refinance with bad credit?
It is possible to refinance with imperfect credit. It all depends on the reasons why your credit is currently imperfect. There are some great loan options available. Call one of our expert mortgage advisors to determine whether or not you qualify for one of our programs.
Is it true that you should only consider refinancing if you can lower your rate at least .5%?
When it comes to refinancing there is no magic number. There are so many reasons to refinance and everyone’s situation is different. You may be in an adjustable rate mortgage and want to convert to a fixed rate mortgage. If this is the case, you may find that your payment might increase but you will be in a better situation for the long term because you have the peace of mind knowing your payment is not going to increase over the life of your loan. There are also no-cost* and low-cost refinance options that may lower your payment and/or rate with either minimal or no investment. The best idea is to speak to one of our expert mortgage advisors and review your situation with them. From there, you can find out if a refinance makes sense for you.
What is a cash-out refinance?
A cash-out refinance puts your home’s equity to work for you. You can use it to pay for college tuition, make home improvements which can in turn increase your home’s value, pay off credit card debt, or purchase a second home. A cash-out refinance completely pays off your first mortgage and allows you to borrow a set amount of money from the equity you have remaining in your home.
How often can I refinance my home?
There are state regulations that limit how soon or how often a homeowner is allowed to refinance. Your mortgage advisor can give you the information on the specific regulations in your state. The most important consideration in a refinance is to determine if it meets your financial goals. A couple of things to consider are: Will your interest rate be lower than it currently is? How much equity is in your home? Is there a pre-payment penalty on your current mortgage? How long would you like to stay in your current home?
How long is the refinance process?
If you are able to provide all the required documentation that is needed in a timely manner, we should be able to close your refinance loan in a little over 30 days.
What happens at the loan closing?
It varies from state-to-state. Depending on where your property is located, it may be necessary for you to go to a designated settlement location such as an escrow office or attorney’s office. Some states allow for you to sign in the comfort of your own home. While in the presence of a signing authority, you will review and sign all your loan documents. If you decided to finance the closing fees and other applicable closing funds in your new loan then the process is complete.* If not, then you will need to present a certified or cashier’s check to pay the closing fees and other applicable closing funds. It’s that simple. Refinance made easy.
* No closing costs options are NOT available in Washington.