How to Lower Your Mortgage Payment by Refinancing
For many homeowners, the mortgage payment is often the largest expense in the monthly budget. Given the current market conditions that have kept interest rates at or near historic lows, there might be a chance to lower your monthly mortgage payments through refinancing. Let’s delve into how refinancing could help you save on your mortgage costs.
Refinance to a lower rate
As frequently reported by various TV and online news outlets, interest rates are exceptionally low right now. Depending on the terms of your initial mortgage, refinancing can potentially lead to significant savings. Refinancing to a lower mortgage interest rate, known as a rate and term refinance, could be particularly beneficial if your initial mortgage was an Adjustable-Rate Mortgage (ARM) and you prefer to secure a fixed interest rate to avoid market fluctuations.
Although many factors can influence your decision to refinance, if your current mortgage interest rate is at least 0.50%-0.75% higher than current market rates, it’s worth discussing your options with a mortgage loan officer. You can also check today’s market rates on our website.
Refinance to a longer term
Refinancing to a longer-term mortgage allows you more time to pay off your mortgage. For instance, if you’ve been paying your mortgage for 9 years, refinancing the remaining balance into a 30-year mortgage could reduce your monthly payments. However, keep in mind that while your monthly payments will be lower, you’ll end up paying more in interest over the life of the loan.
Get Rid of PMI
Although removing PMI isn’t technically a way to refinance your mortgage, it’s worth mentioning because it can lower your monthly mortgage payments. If you initially put down less than 20% when purchasing your home, you might be paying Private Mortgage Insurance (PMI) as part of your monthly mortgage payment. If your home’s value has increased or you’ve built over 20% equity, you can contact your lender to remove PMI from your mortgage loan.
Your lender may require a new appraisal to remove PMI, which involves some upfront fees. However, removing PMI can save you hundreds, or even thousands, of dollars annually. If you have the necessary equity in your home, it’s definitely worth exploring this option.
How do I refinance?
We understand that the thought of going through the mortgage process again can be daunting. Fortunately, since you’re already familiar with the mortgage process, refinancing will be quite similar to your original mortgage experience, minus the house hunting. To begin, you’ll need to complete a mortgage application and review the financing options prepared by your mortgage loan originator.
Just like during your initial loan experience, refinancing requires you to provide documentation about your assets, liabilities, and income. Depending on the type of mortgage program you used when purchasing your home, several streamlined refinance programs require less paperwork and documentation. These include the FHA streamline refinance and VA streamline refinance (also known as the VA IRRRL or Interest Rate Reduction Refinancing Loan).
After completing your application, your loan file will go through underwriting and proceed to closing, similar to the process when you bought your home. At Mutual of Omaha, we guide you through the entire process to ensure your refinance is as seamless as possible.
Your Trusted Atlanta Mortgage Lender
If you’re looking to create extra room in your budget, now is an excellent time to explore refinancing options to lower your monthly payments. If you’re ready to get started or would like a no-obligation mortgage analysis, please reach out to us. We’re here to help.
In Atlanta, GA, we take pride in offering reliable lending services with a thorough understanding of the local market. Our team is committed to delivering personalized solutions to meet the diverse needs of both homebuyers and homeowners. We strive to provide the best possible advice and options tailored to your unique situation. Whether you’re buying your first home or refinancing your current mortgage, our expertise and resources will guide you through the process smoothly.