To refinance a mortgage means you get a new loan to replace the old home loan, and there are numerous reasons to refinance your mortgage. 

• To get a lower interest rate on your mortgage along with a shorter term.
• To get a shorter term so that the mortgage can be paid off sooner. For example, you can switch from a 30-year loan to a 15-year loan.
• To extract money from the equity of your home, known as cash-out refinance.
• To switch from an adjustable-rate mortgage to a fixed-rate loan, or the other way around.

Rate-and-Term Refinancing

This refinancing pays off one loan with the proceeds from the other newer loan and uses the same property as collateral. This kind of loan allows you to best take advantage of lower interest rates or shorten the amount of time you will spend paying your mortgage while being able to build equity faster.

Example of Rate-and-Term Refinancing

Let’s say you get a $100,000 mortgage with an interest rate of 5.5 percent.

Now, after three years and 36 timely payments, you now only owe about $95,700 but interest rates have fallen and you can refinance at an interest rate of 4 percent.

In this situation, you can save more than $100 every month by refinancing and starting over with a 30-year loan. Or, if you do nothing, you can save less monthly, while paying off the loan in 27 years. Which would you rather do?

Is refinancing in your future? To know for sure, or at least have some idea, you need to at least know the basics of this process. For all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California, contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. We have the experience needed to make sure you get the right mortgage.