Homeowners often believe that the only reason to refinance a mortgage is to reduce monthly payments. While this is of course a driving factor behind many refinances, there can be many other benefits as well. It is important to be cautious when deciding whether to refinance. Even if refinancing allows you to reduce your monthly payments now, it could end up costing you money in the long run if you’re not careful. At JZ Mortgage Services, Inc., we want to provide you with all the information you need to decide if refinancing is the best choice.

Common Reasons for Refinancing

• Obtain a better interest rate to lower payments or reduce your loan term
• Reduce monthly payments in exchange for an extended loan term
• Consolidate debt into a single loan
• Switch from a variable-rate loan to a fixed-rate loan
• Take advantage of home equity to acquire cash

When interest rates begin improving in the market, people often begin to review their refinancing options. An old rule of thumb is that if you can decrease your interest rate by at least 1%, refinancing will be beneficial. This is of course a rule of thumb and your individual circumstances will need to be taken into account.

Homeowners who plan to stay in their current homes for an extended period of time are prime candidates for refinancing. On the other hand, those with short term plans to relocate will need to take a closer look to see if refinancing will be beneficial. Closing costs need to be paid when refinancing just as they were when you purchased your home. These closing costs can be quite significant and can impact your decision to refinance. For example, if closing costs are $5,000 and you save $200 a month by refinancing, it will take a little over 2 years in your current home to fully recover those costs. If you save only $100 per month, it will take 4 years to recover the same costs.

It is also important to consider how much longer you have left on your current mortgage. If you are only 10 years into a 30-year mortgage, refinancing into another 30-year mortgage will of course extend the amount of time until you own your home. For many homeowners, not having a mortgage payment after retirement is quite important.

For those who currently have an FHA or VA loan, streamline refinance programs are available. Streamline refinances are quick, easy, and only available if refinancing will provide the borrower with a “net tangible benefit.” Simply put, this means the refinance must save the borrower money in order to be approved. This eliminates the uncertainty of refinancing for many homeowners.

Cash-out refinance loans allow homeowners with equity in their homes to take out cash for home repairs, renovations, and other needs. Home equity provide similar benefits but involve creating a second loan on top of an existing mortgage. Cash-out refinances are a true refinancing of your existing mortgage.

JZ Mortgage Services, Inc. specializes in Florida refinance loans throughout Bradenton, St. Petersburg, Sarasota, and Tampa. Whether you are looking to lower your monthly payment, or need cash to make repairs to your home, we are here to help. To see how we can help you save money through refinancing, contact us JZ Mortgage Services, Inc. today.