Refinancing a mortgage is one of the most popular ways to lower your monthly payments. That’s because refinancing has the potential of lowering your interest rate and getting you better terms on your loan overall.
This means not only that you end up paying less per month but also that you save money on the overall loan.
How exactly does refinancing work?
When you refinance your mortgage, you basically replace whatever you currently owe on your house with a completely new loan. If interest rates have dropped since you purchased your home, then you may be able to get a much lower interest rate on your refinanced mortgage.
This is a great way to save money because you may be able to:
- Pay less in the long run.
- Reduce your monthly payments (meaning less money to repay and more time to do it).
- Get some cash out of the refinance.
When you do a cash-out refinance, you replace your current mortgage with the refinanced loan. However, instead of using the new loan to pay off only what you owe, you can choose to take out a bigger loan, depending on how much equity you have in your home.
You might be asking, “How can I refinance my mortgage loan?”
The answer is simple: just meet the requirements for the new loan and complete the application process. Depending on factors like your credit and national interest rates, you may be able to get great terms on a fixed-rate refinance.
There is another way to refinance a mortgage: with VA loans. The VA has two different programs that service members, veterans and spouses can use to lower their rates: the VA Streamline Refinance (or IRRRL) and the VA Cash-Out Refinance, which lets you refinance a home loan to get cash.