Refinancing a previous credit agreement is an effective way to improve on the existing loan terms, payment schedule, and interest rate. A homeowner will likely look to refinance a loan when there has been a noticeable change in the general rate situation. This can lead to useful monthly saving once a fresh agreement is in place.
However, there are a variety of mortgage refinance programs, so it is essential to put in the time and effort to identify the most promising options. Let’s take a look at a few of the most popular options:
- FHA Streamline
- HARP Program
- VA Streamline
The process of refinancing a home loan is simply to pay off the outstanding balance on the existing loan and instantly create a fresh one with the most favorable terms and conditions. Refinancing can present plenty of different options and scenarios. In most situations, if you are in a good enough position to refinance a mortgage you should take the necessary steps to do so. In the long-term you are certain to see a positive effect on the finances.
The most typical results lead to affordable monthly payments or a lower rate of interest. Any extra monthly income that results from refinancing can be used for many reasons, such as paying off other debts or making home improvements.
What are the options?
There are many different types of mortgage finance, including:
The traditional refinance loan gives the option to renegotiate the remaining term of the loan to achieve a more favorable rate of interest. Also, it may be possible to shorten the loan maturity period while still being able to enjoy the better monthly repayments. The aim of any refinancing program is to make the existing home loan a lot more affordable. The preferred time to look at applying for a traditional refinance program is when you start to see a reduction in the interest rates, which should lower to a rate that is below the figure you originally applied for finance. Any changes in interest may relate to a different lender that is offering the most favorable terms, the ability to improve on your credit score, or a change in the prime interest rate.
The 15 year refinance option is a viable option if you are looking to get the most attractive rates to pay down the mortgage over a shorter period of time. Even though this type of refinance program will naturally have the highest monthly payments compared to the 30 year refinance, it will save money over the long term because there is a lot less interest to pay. If applying for home finance at a time of low interest rates, there is the potential to save literally thousands of dollars.
The option to apply for a 30 year refinance program will appeal if looking to significantly lower the month-to-month payments. Converting the existing home loan to a 30 year time frame can easily help save many hundreds of dollars every month.