Is Refinancing Your Mortgage a Good Move?

For many people, an affordable monthly mortgage payment is one of the most important aspects of owning a home. Depending on your current financial situation, housing market fluctuations and changes in interest rates, refinancing may be an attractive option to help lower your monthly payment.

What is a mortgage refinance

Simply put, a mortgage refinance replaces your current mortgage loan with a new loan that may have a lower interest rate and/or shorter term. There are several benefits to consider with refinancing:

• If current interest rates are lower than the rate on your existing loan, you might be able to receive a lower rate and reduce your monthly mortgage payment.
• You may be able to shorten the term of your loan, which could allow you to pay it off in less time and save thousands of dollars.
• If you currently have an adjustable-rate loan, you may be able to switch to a fixed rate loan.
• It’s also possible to drop private mortgage insurance (PMI) and reduce your monthly mortgage payment if PMI was included in your existing loan, and the principal balance of the loan is 80 percent of the home’s original value.

What options are available

Refinance options vary and are designed to meet specific needs:

• Rate and term – This is one of the most common choices for those looking to lower their rate.
• Cash out – Upon refinancing, you can receive a lump-sum payment by converting some of the equity you have in your home to cash.
• Cash in – You can pay down your loan principal to build more equity as you refinance.
• No closing costs – Some lenders offer a no closing cost option enabling you to avoid paying closing costs. This option may increase the amount of your monthly payment and the amount paid over the life of the loan.

What to keep in mind

While refinancing can be a good move, it may not be right for everyone. As you explore your options, consider your long-term financial goals and compare potential changes from your current mortgage to a new loan.

For instance, if a new loan doesn’t lower your monthly mortgage payment or reduce the term of your loan, you may want to wait until market conditions change for more beneficial terms. Alternatively, if you need funds to cover a large expense or remodeling project, refinancing with a cash-out option may offer lower rates than other loan types.

Keep in mind that refinancing pays off over the long run—if you are planning to sell your property within the near future, you might not be able to take advantage of the benefits a refinance could provide.

What you’ll need for a refinance

When you refinance, you are applying for a new loan. Your lender will review your credit score and amount of debt owed, verify your employment and income and require certain financial information, like W-2 statements, deposit statements, etc.

There are also costs associated with refinancing that you will need to be prepared to pay. Costs vary and typically include:

Evaluating whether refinancing is the right move or which option might best meet your financial needs can be tricky. If you are interested in exploring your refinancing options, know that the mortgage professionals at Trustmark are here to help you through every step of the process. Click here to apply today or find a mortgage expert near you.