You’ve most likely heard someone talk about refinancing their home. Like most people, you might not necessarily know exactly what that means. Refinancing is when you take out another loan to pay off different loans. For example, you could refinance your home to pay off the current loan. This can all seem confusing and odd, but we want to help you understand what refinancing means, when you should consider refinancing, and how to refinance.
What is Refinancing and When Should I Consider it?
As mentioned, it’s taking a loan out against something you own, typically a car or home, and using that to pay off a different loan. Refinancing is also a way to obtain cash, using your home as leverage. You might be asking yourself, why would I want to pay off a loan with another loan?
Typically, people refinance to get a lower interest rate and payment. It might be a good time to refinance if you currently have a variable interest rate and can secure a fixed rate. Refinancing can also allow you to have a little more cash in your pocket by using your home as collateral for a cash out. This option is great if you need money to pay off other debts or fund home improvements. Obtaining money through refinancing requires collateral, which will be your home.
When considering refinancing, it is important to consider your financial situation and if it’s the right move for you. Refinancing isn’t as simple as waiting to get approved for a new loan. Home refinancing requires payment of similar fees to the initial home loan process: closing costs, taxes, and other associated fees. Another consideration is how long you’ll be in your home. Will you stay there long enough that your savings will be enough to break even on your refinancing fees? This is important to consider because you want to make sure you’re getting your money’s worth. If you want to refinance your home, but plan to move in the next few years, it may not be worth it. It’s worth considering that, typically, you want to be able to break even on the refinancing costs within two years. If you’re not planning on staying in your home for longer than a few years, this may not be the best option for you.
The final consideration on when you should refinance your home, or if you should, is your credit score. Your score affects the interest rate of your new loan, just like taking out the original loan. It also decides whether or not you’ll be approved to refinance.
How Does it Work?
To refinance your home, you’ll have to speak with a hard money lender. You should also consider the outcome you’re looking for to determine the direction you should take. The lenders you speak with should be able to walk you through the specifics and help you make the decision that best fits your needs. Once you find a lender you’re comfortable with, you just need to lock in your interest rate and close on the loan.
Is refinancing something you’re interested in? Let our knowledgeable team help you. At Cardinal Capital Group, we offer refinancing for both residential and commercial properties. We also offer up to 70% loan-to-value (LTV). Our refinancing options also include portfolio refis and mid construction loans. Talk to a finance specialist at Cardinal Capital Group today!