A Guide to Financing Home Improvements and How Mortgage Refinancing Can Help

A Guide to Financing Home Improvements and How Mortgage Refinancing Can HelpIf you’re planning to remodel or renovate your home in the near future – whether to provide a better living environment or as part of a house flip – you’ll need to find a way to pay for your home improvements. There are several different possible sources of renovation money, each with their own advantages and disadvantages. One option that is gaining popularity is mortgage refinancing.

How does mortgage refinancing work, and how does it compare to other renovation financing options? How can you use a mortgage refinance to get the most out of your renovation? Here’s what you need to know.

Home Improvement Investments: Which Renovations Generate The Best Returns?

If you’re considering a mortgage refinance in order to fund your home improvements, you’ll want to concentrate on doing renovations that increase your home’s value. Otherwise, you’ll be taking on more debt without gaining anything in return.

If you want to max out your return on investment, re-finishing your kitchen is your best strategy. Remodeling Magazine’s annual cost-to-value renovation analysis shows that new appliances, a new coat of paint, and new surface finishes in the kitchen generate the biggest returns. Meanwhile, swimming pools and home offices tend to generate the lowest returns because they appeal only to a select group of buyers.

Your Options For Financing Home Improvement Projects

Financing for a home improvement project is a critical consideration. Unless you can afford to pay $20,000 out of pocket for a remodeling project, you’ll need to secure financing of some sort.

Your options for home improvement financing include home equity lines of credit, renovation mortgages, and refinancing. A HELOC may not be an ideal solution, as repayment requires discipline, while a renovation mortgage (or home renovation loan) is typically used only for foreclosures and other properties requiring major renovation work.

Mortgage Refinancing: A Smart Option For Savvy Borrowers

If you’re looking to simply make improvements to your existing home, a mortgage refinance is likely your best option. A straight refinance gives you a lump sum of cash that you can use to pay for renovations upfront.

There’s also a “refinance plus improvements” arrangement, which can provide you with extra capital as you need it. Under this model, you can get up to 80% of your home’s post-renovation appraisal value – however, you’ll only get the money as the renovations are completed and inspected. With a straight refinance, you’re not out of pocket for any length of time.

Making smart home improvements is a great way to boost your home’s value and improve your living conditions. An experienced mortgage professional can help you to find financing for those renovations without a hassle. Contact your local mortgage advisor to learn more.

Refinancing A Mortgage: Is It Too Soon?

Refinancing A Mortgage: Is It Too Soon?Due to the fact that mortgage rates are still hovering near record lows, many homeowners are considering refinancing to a lower interest rate. This is a great way for homeowners to shorten the term of the loan, reduce the size of their monthly payments, and access cash for a home improvement project. On the other hand, there are some situations where it might be too soon to refinance an existing mortgage. What are a few factors to consider?

Conventional Home Loans Might Require A Certain Amount Of Equity

Homeowners with a conventional loan should reach out to their lender to see what the requirements are on the home loan before refinancing. Some lenders require homeowners to have a certain amount of equity built up in the home before they allow lenders to refinance, particularly for a cash-out refinance (when homeowners refinance and tap into home equity as a source of cash). Other lenders might simply require homeowners to wait six months after taking out the initial home loan before going through the refinance process. This all depends on the type of home loan.

FHA Loans Have Several Refinancing Options

An FHA loan is a loan backed by the government. There are several refinancing options available. First, homeowners seeking a cash-out refinance must have lived in the home as the main residence for 12 months and must have had a mortgage for six months. A simple rate adjustment refinance requires seven months of waiting after taking out the initial loan. Finally, anyone going through the FHA streamline process must have made six months payments in order to go through this process.

VA Loans Have A Simple Waiting Period

Anyone with a VA loan must wait 210 days or make six mortgage payments before they are allowed to refinance. Homeowners with questions should reach out to the lender to learn more.

It Might Be Time To Refinance

Because interest rates are still low, this could be a great time for homeowners to refinance their current home loans; however, it might be too soon for some homeowners. Keep in mind that there will also be closing costs associated with refinancing a home loan. Homeowners should work with a professional to see if refinancing is worth it for them.

What Are The Most Common Mistakes Homeowners Make When Refinancing?

What Are The Most Common Mistakes Homeowners Make When Refinancing?There are lots of people who are looking to take advantage of low interest rates to refinance their homes. This provides homeowners with an opportunity to save tens of thousands of dollars over the life of the loan. It could also allow homeowners to access equity to finance a home renovation or shave years off their mortgage. On the other hand, there are also a lot of people who make mistakes during the refinancing process. What are some of the mistakes that everyone should make sure they avoid?

Avoid Saying Yes To Loan Forbearance On A Mortgage

First, try to avoid mortgage forbearance if you can. If homeowners decide to pursue mortgage forbearance, they might have a bit of extra cash on hand because they will be able to skip a few payments. On the other hand, this could signal that the homeowner has issues related to his or her cash flow. As a result, homeowners might not get the best offer possible when they apply to refinance their mortgage down the road.

Always Check The Credit Score Before Applying

Next, homeowners should always check their credit scores before they decide to apply for a refinancing opportunity. It is not unusual for people to have mistakes in their credit scores. Nobody should have to pay for someone else’s financial mistakes. Homeowners have to remove these inaccuracies from the credit report before they apply for a refinancing opportunity. That way, homeowners have access to the best terms possible.

Check The Estimate Before Agreeing To A Refinance

Finally, homeowners also have to check the estimate before they agree to a refinance. Even though there are opportunities to save a lot of money, there are other fees involved. These could include points, origination fees, and other fees that could be included in closing costs. Homeowners have to be ready to pay these costs if they are going to refinance their loans.

Avoid These Mistakes When Refinancing

These are a few of the most common mistakes people make when they go through the refinancing process. By avoiding these mistakes, homeowners can place themselves in the best position possible to save money by refinancing their loan to more favorable terms.

Should I Shorten My Mortgage Term, Important Factors To Consider

Should I Shorten My Mortgage Term, Important Factors To ConsiderWhen you first bought your home a few years ago, perhaps you started off with a 30 year mortgage. Now, you are considering refinancing and changing it to a 20 year or even a 15 year mortgage.

Shortening your mortgage term and refinancing can be a smart financial move, but before you make this decision there are a number of factors that you should consider.

Switching to a shorter mortgage will mean that your monthly payments will be higher, but you will be 100% paid off much sooner and you will save thousands of dollars in interest rates. Here are a few of the factors to consider before making this decision:

Has Your Situation Improved?

Perhaps you have moved to a higher paying position, allowing you to earn a higher income and pay off more of your mortgage every month? Or maybe you have received an inheritance, which will help you to make the payments? Perhaps your expenses have gone down and you will have more money left over from your wage?

Whatever the reason, if your financial situation has improved you might want to consider switching to a shorter mortgage. With your spare money, you will be able to make the larger payments and get your house paid off sooner.

Is The Improvement Long Term?

However, it is important to consider whether this improvement will last for the long term. Will your higher wage stay that way for the next several years? Are there any hidden expenses that you are failing to factor in?

You might be set up to repay larger monthly amounts on your mortgage at the moment, but you don’t want to set yourself up for failure in the future if your finances change.

What Are The Refinancing Costs?

Keep in mind that refinancing often comes with costs and fees, so make sure that you subtract these when you are making your calculations. It can sometimes take at least two or three years to recoup the fees, so make sure that you don’t plan on selling your home in the short term.

Can You Get A Better Rate?

One of the advantages of refinancing to a shorter mortgage is that you can sometimes get the opportunity to find a better rate. Perhaps if you have an adjustable rate you will be able to convert it to a fixed rate. Take a look at what is available and ask your financial advisor for help.

These are just a few important factors to consider when it comes to shortening your mortgage term. For more info about your home, contact your trusted mortgage professional.

The Required Steps For A Smooth Mortgage Refinance Process

The Required Steps For a Smooth Mortgage Refinance ProcessThere are lots of people who have heard that one of the top ways to ensure the best mortgage rate possible is to refinance. At the same time, it is critical to make sure that this process is planned out accordingly.

Therefore, there are a few steps that everyone has to follow to make sure they are able to handle the mortgage refinancing process in a smooth manner that leads to the best rate possible.

Ask If A Refinance Is The Right Step

There are a lot of people who assume that a mortgage refinance is a financial win; however, it is important to keep the added costs in mind. For example, the refinancing process is going to lead to another closing. When this happens, there are going to be closing costs that must be considered.

Therefore, the refinancing process could lead to a higher mortgage payment if the money saved on interest payments is not enough to offset these costs.

Check The Credit Score First

Many people get lured into the refinance process by looking at low mortgage interest rates and assuming they are going to qualify for them; however, this is not always the case. Only the people with the top credit scores are able to qualify for these low rates. Therefore, everyone needs to take a look at their credit score and make sure that their credit report has been cleaned up. This is the only way that people are going to be able to qualify for these low rates.

Talk To A Trained Professional

Finally, many people are going to be going through the refinance process for the first time. It is important to work with a trained professional who can walk everyone through this process, ensuring that they know what they are doing as the process unfolds. This can go a long way toward ensuring that everyone has a successful refinancing experience.

Go Through The Right Steps

Following these steps can maximize everyone’s chances of making sure they end up with a refinance that works for them. By planning out the process ahead of time, everyone can go through the steps they need to make sure that the refinancing process proceeds as smoothly as possible.

Should Homeowners Refinance?

Should Homeowners Refinance?Most people have heard the saying that it might be a good idea to refinance if mortgage rates drop. For those who might not know, refinancing is essentially taking out a new loan to replace the old one because the new loan has a lower interest rate.

This could shorten the time span of a long time and reduce monthly payments, or save money on the total cost of the home. At the same time, refinancing is not right for everyone. How can homeowners determine if refinancing is right for them? 

Do They Qualify?

Just because there are lower interest rates available does not mean that homeowners are going to qualify. It is important for homeowners to make sure they qualify for lower interest rates on their home loans. Be sure to conduct a quick credit check to clean up inaccuracies on the credit report. Then shop around and get quotes from different lenders. 

What Are The Potential Savings?

If homeowners qualify for a better rate on the mortgage, it is time to crunch the numbers. Everyone needs to figure out exactly how much money they are going to save depending on which refinancing option they choose. Some of the factors to consider when looking at refinancing plans include the terms of the loan, the interest rate, and the overall monthly payment. 

What Are The Closing Costs?

Finally, there are going to be the closing costs that go along with every refinancing plan. The good news is that these closing costs on negotiable. Sometimes, the closing costs will determine whether or not refinancing is worth it. Therefore, homeowners need to consider the closing costs as well. If the closing costs appear high, make sure to speak with different lenders and see if they are willing to provide a break on the costs.

Are The Homeowners Planning On Staying In The Home?

Finally, refinancing is only going to be worth it if the homeowners are planning on staying in the home. There is no point in paying for a new home loan if the homeowners are planning on moving next year. Therefore, be sure to consider this along with all of the other questions listed above to determine whether or not refinancing is worth it.

 

Refi or Wait? How to Choose Between Refinancing Your Mortgage Now or Waiting Until You Need the Money

Refi or Wait? How to Choose Between Refinancing Your Mortgage Now or Waiting Until You Need the MoneyRefinancing your existing mortgage may provide you with the opportunity to lower your interest rate, reduce your mortgage payment and adjust your loan term. For those homeowners who have lived in their home for more than a few years, pulling equity out of the property for everything from a luxurious vacation to making home improvements is a tempting potential benefit.

However, with property values and interest rates adjusting frequently, you may wonder if now is the best time to refinance your mortgage.

Using Equity From Your Refinance

One factor to consider when debating between refinancing now and waiting relates to pulling equity out of your home. If you need access to the cash now for home improvements or other purposes, refinancing now may be ideal. Even if you do not need access to your equity for several months or longer, you can lock in today’s rates and invest the money in other vehicles, such as CDs or bonds, until you need the cash.

Anticipating Market Changes

You may have heard that the interest rates for home mortgages have been slowly rising, and while they remain close to historic lows, they are projected to continue to rise. Nobody can predict with certainty how interest rates will adjust in the next few months and years, and locking in today’s rates may be beneficial. Keep in mind that if rates decline significantly in the near future, you can always look into refinancing again.

Reducing Your Principal

If you have a higher interest rate on your existing mortgage, your principal balance may be reduced at a slower rate than if you refinance to a lower interest rate. In addition, if you refinance from a 30-year term to a shorter term length, your principal balance will also be reduced more quickly in most cases. In many situations, refinancing your home mortgage today may establish a more efficient repayment schedule that allows you to accrue equity at a faster rate.

Each homeowner has unique factors to consider when refinancing based on property value, credit rating, existing loan terms and other factors. While many will benefit by refinancing an existing mortgage today, you can speak with a mortgage professional for specific advice and recommendations regarding your situation. Call your trusted mortgage representative today to inquire about the options and to begin working on your refinance loan application.

3 Signs It Is Time For You To Refinance Your Mortgage

3 Signs It Is Time For You To Refinance Your MortgageIf you are looking for ways to save money on your mortgage, refinancing might be a good option. For those who might not know, refinancing can help a homeowner reduce monthly mortgage payments by switching to a lower interest rate. 

Basically, the homeowner takes out one loan at a lower interest rate to pay off the old loan, which is at a higher interest rate. While the homeowner may have to pay closing costs a second time, this could save someone hundreds of thousands of dollars over the life of the loan. Furthermore, those who want to pay off their loan more quickly may be able to do this as well. There are a few signs that someone should refinance their home loan immediately.

1. Current Mortgage Rates Are Significantly Lower

One of the biggest signs that someone should refinance is that current home loan interest rates are way lower than what they have. While everyone’s financial situations are different, if the current average interest rate is more than a point lower than your current interest rate, you should consider refinancing

While not everyone is going to qualify for the current average interest rate, some people might. This means that this is a possibility worth examining. If you can qualify for a much lower interest rate, it is time to refinance.

2. Your Credit Is Good

In order for you to qualify for home loans with lower interest rates, your credit has to be in good shape. There are ways for you to improve your credit score. Paying off credit card debt, paying your bills on time, and fixing errors on your credit report are all great ways to raise your credit score. If your credit score is good, it might be time to refinance.

3. You Are Not Moving Any Time Soon

As mentioned above, you may have to pay closing costs when you refinance. Therefore, if you plan on staying in that house for a while, this could be a good time to refinance. On the other hand, you don’t want to pay closing costs just to move again next year.

These are a few of the biggest signs that indicate it is time for you to refinance. Don’t pass up this chance to save money! 

The Four Best Questions To Ask Before Refinancing Your Mortgage

The Best Questions to Ask Before Refinancing Your Mortgage1) Do I have enough equity to get a mortgage?

To get a conventional loan, you will usually need to have at least 20 percent equity. This means that your house will have to be worth at least $250,000 to get a $200,000 loan. If you have less equity, you could end up having to pay for private mortgage insurance, which can easily add $100 or more to your monthly payment.

2) How’s my credit?

Most lenders will look at your credit score as a part of determining whether or not to make you a loan. With conventional lenders, your rate will depend on your score and the higher it is, the lower your payment will be. Other lenders, like the FHA and VA programs have an all or nothing rule. If you qualify, your rate won’t be based on your credit, but if your score is too low, you won’t be able to get any loan. 

3) What do I want to accomplish?

Mortgages typically offer a choice as to their term. While the 30-year loan is the most popular, shorter term mortgages save you money since you pay less interest over their lives. They also get you out of debt sooner, at least with regard to your house.

The drawback is that they carry higher payments since you pay off more principal every month. This can make them less affordable for some borrowers.

4) How’s my current loan?

If you have an adjustable rate mortgage, you may want to switch to a fixed rate mortgage simply for the additional security it offers you. On the other hand, if you are planning to move relatively soon, your current mortgage could be a better deal whehter it’s fixed- or adjustable-rate.

When trying to decide what to do, compare the cost of refinancing with what it would cost you in additional interest to hold on to your existing loan. While the breakdown is different for every borrower, generally, you’ll need to keep your current house and loan for anywhere from three to six years to break even on the costs of refinancing.

Deciding what to do with your mortgage can be complicated. Working with a qualified loan broker that can consider every angle with you can help you to make a better decision.

The Pros and Cons of A Fixed Rate Second Mortgage vs. Opening a Home Equity Line of Credit

The Pros and Cons of Refinancing Your Mortgage vs. Opening a Home Equity Line of CreditWhen it comes to a mortgage and the financial stability of your home, there’s no such thing as too much you can know in the case of keeping your biggest investment safe. If you’re looking at paying off debt and are considering using the equity in your home, here are a few things you’ll need to know about refinancing your mortgage and home equity lines of credit.

Fixed Second Mortgage vs. HELOC

Refinancing your mortgage to access equity (without changing the existing first mortgage)comes in two basic flavors: a fixed rate mortgage or a Home Equity Line of Credit (HELOC). A fixed rate second mortgage is also known as a home equity loan. While you’re expected to pay the amount loaned back in monthly payments for a pre-determined number of years, you’ll receive this money at a fixed rate of interest. On the other hand, a home equity line of credit (HELOC) is similar to a credit card where the amount you can borrow is determined by your credit history and income, and funds are withdrawn using this line of credit, can be paid down, and then drawn back on again.

All About The Interest Rates

When you refinance using a fixed rate second mortgage, the interest rate will be fixed so you won’t have to worry about any volatile increases down the road. Since this qualifies as a second mortgage, the interest rate on it will be higher than your typical first mortgage but lower than a HELOC. When it comes to HELOC’s, the amount of interest you’ll be paying will be linked to the prime rate and will fluctuate with the market, and this means you may end up paying a higher amount of interest than you bargained on.

How The Interest Is Calculated

While refinancing your mortgage can seem like a great opportunity since you’ll be able to deal with a fixed interest rate, it’s worth noting that the way you’ll be charged is different. A mortgage refinancing will charge you interest on the total amount of your loan while a HELOC will only require you to pay interest on the money you’ve withdrawn from it, so you’ll want to consider which option works best for you.

When it comes to getting a second mortgage or opening a HELOC, there are pros and cons to both that should be considered before delving into either. As these can risk the security of your most important investment, you’ll want to carefully weigh what will work best for you. If you’re curious about other homes in your area or are thinking of downsizing, you may want to contact one of our local mortgage professionals for more information.