When should I refinance my mortgage? 4 factors to consider

• How much home equity do you have?
• What are your mortgage goals?
• What are the current interest rates?
• How long has it been since you purchased your home?

How much home equity do you have?

One of the biggest advantages of owning a home over renting is the ability to build equity. Home equity is what your home is worth in the current market, less the amount owed on any mortgage. In other words, it’s the percentage of your home that you own. Unlike monthly rent, every payment you make on your mortgage gets you closer to paying it off entirely, all while your home equity keeps accumulating. 

If your home equity is high, you could leverage it for better rates, cash out, or a new loan type when you refinance. So, how much equity is a lot of equity? As in all things mortgage, it depends on your unique financial situation. In general, you’ll want to aim for at least 20% equity in your home before considering a refinance.

What are your mortgage goals?

When most people think of refinancing, the first thing that comes to mind is a rate and term refinance. As the name implies, a rate and term refinance allows you to get a new rate and/or term on your mortgage. You may also be able to refinance to a different loan type that better meets your needs. It’s not the only option out there, though. 

A refinance can also be used to fund home renovations, leverage your home equity for cash, and more. The goal you have in mind can help you determine if it’s the right time to refinance. For example, if your goal is lower rates and rates are higher than usual, it might be better to wait until rates drop. If your goal is to boost equity with renovations, seasonality might be important to factor into your decision as well.

Top 5 reasons to refi

1. Lower your interest rate to get a lower monthly mortgage payment.
2. Get cash out of your home equity to get funds for home reno, remodeling, and more.
3. Consolidate debt* to make fewer loan payments on a monthly basis.
4. Pay the same amount each month to gain financial stability.
5. Pay off your mortgage faster to save on interest and gain complete ownership.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

What are the current interest rates?

Speaking of rates, let’s discuss the elephant in the room. While rates aren’t the only factor to consider when asking, “When should I refinance my mortgage?” they’re undeniably an important one. No matter your mortgage goals, rates will impact your ability to reach them. 

Yes, lower rates are typically more desirable. But unfortunately, when it comes to average market rates, there’s only so much you can control. It’s up to you to decide if it’s worth it to hold off on refinancing until average rates are lower. And there’s always the risk that if you wait for rates to get lower, they may actually go up instead. 

It’s not an easy decision, but remember that your best rates don’t only depend on the market. Factors like your credit score, home equity, and debt-to-income ratio (DTI) can also help you qualify for better rates regardless of the market. So, if your finances are where you want them, it might be the right time for you to refinance even if average rates aren’t ideal.

How long has it been since you purchased your home?

This one might go without saying, but if you’ve just recently closed on your home or a previous refinance, you’ll want to hold off on starting the process again right away. Aside from the fact that each transaction involves additional costs like appraisal fees, criteria like your credit score or home equity are unlikely to have changed enough to qualify you for new terms in a short period of time. Unless there’s a drastic shift in rates that you plan to take advantage of, it’s recommended to wait at least six months before refinancing after you’ve closed on your last purchase or refi. Keep in mind that some loan types or lenders may also require specific waiting periods before you’re allowed to refinance. 

So, when should I refinance my mortgage?

Now that we’ve gone over some home refinance pros and cons, let’s revisit whether or not it’s time to refinance your mortgage. 

It might be time to refi if:

• You’ve built up at least 20% equity
• A refi fits your homeownership goals
• Rates are low(er)
• It’s been at least 6 months since your last purchase or refi

Of course, everyone’s situation is unique. These four factors are a good place to start when asking if you should refinance your mortgage, but you should always consult with your own mortgage professionals and financial advisors to determine if it’s right for you. And if you have any questions, we’re here to help.

If your finances are where you want them, it might be the right time for you to refinance even if average rates aren’t ideal.

The post When Should I Refinance My Mortgage? 4 Factors to Consider appeared first on Cardinal Financial.

Should I refinance my FHA loan?

Refinancing (of any kind) is essentially just paying off one loan by getting another loan. The rule of thumb is that if you can benefit from a refinance, either by getting better loan terms or a lower interest rate, you should consider doing it. There are plenty of great reasons for homeowners to refinance their mortgage, including:

• Lowering their monthly payment
• Paying off their loan sooner
• Switching from an adjustable-rate loan to a fixed-rate loan
• Tapping into home equity to take cash out

If you’re looking to take advantage of a lower interest rate, better loan terms, or get cash out, you should consider a refinance.

What are my FHA refinance options?

If you want to refinance your FHA loan, there are two basic options: Refinance to a different loan type, or refinance to another FHA loan with new terms.

Refinance to a different loan type

You can replace your FHA loan with another one, such as a Conventional loan, which isn’t backed by the government. While it may be harder to qualify for, there are plenty of benefits that come with a Conventional mortgage. For starters, you could avoid mortgage insurance entirely by replacing your FHA loan. As long as you’ve reached 20% equity in your home, you won’t have to pay any mortgage insurance on a Conventional loan.

Pro Tip: Simplify your budgeting and see what rates you can expect with our refinance calculator.

Refinance to another FHA loan

If you decide to stick with an FHA loan, you’ve got a few options for your refinance.

FHA rate-and-term refinance

Most homeowners opt for a rate-and-term refinance to either take advantage of a better rate or switch from an adjustable-rate mortgage to a fixed-rate mortgage. Lenders will require you to go through a credit qualification process and a new appraisal when you apply for the loan. However, it’s possible you could get a better interest rate if you’ve built up equity in your home.

FHA Streamline refinance

Like the name suggests, this loan is more streamlined than a rate-and-term refi because it allows you to refinance with less paperwork and fewer steps. Not only can you lower your interest rate, reduce your monthly payment, or shorten your loan term, you can get it done without having to go through a home appraisal, provide bank statements and your credit report, or verify your income. The lender will just use the information gathered from your initial FHA loan. The Streamline is a better option when your home hasn’t risen much in value, or you’re planning to sell your home soon, because it helps you avoid adding closing costs to your principal balance.

FHA cash-out refinance

If you need cash to make home improvements, consolidate debt, or anything else, the FHA cash-out refinance* is for you. A cash-out refi allows you to take out a loan that’s bigger than your current mortgage, pay off the original loan, and pocket the difference. You can use the cash for whatever you need. You must have at least 20% equity in your home to qualify.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

FHA 203(k) refinance

Planning home renovations? Consider refinancing to an FHA 203(k) loan. This loan is specifically designed to roll your project costs and mortgage into one convenient loan. Why is that a good idea? If you take out a separate loan or pay for renovations with a credit card, you could have to pay more closing costs and higher interest rates. Plus, you’ll take more than one hit to your credit.

More questions to ask to determine if you can refinance your FHA loan.

Is it the right time to refinance my FHA loan?

If you already have an FHA home loan, and you’ve made at least six months of on-time payments, you should be good to go refi. For FHA cash-out refis, you should provide 12 full months of on-time payments.

Are there closing costs?

Like any loan, there are closing costs, but with a Streamline refi, you won’t have to pay for a credit report or appraisal like you might with other loans.

Will I still need to pay mortgage insurance?

If you refinance your FHA loan to another FHA product, you’ll still need to pay mortgage insurance premiums (both upfront at closing and in monthly payments) on your new refi.

What documents will I need to refinance my FHA loan?

For most FHA refinances, you’ll need to provide your credit report, full income and employment verification, and undergo a home appraisal. You should also check with your lender to find out any specific documentation you may need to provide for your refinance.

Can I refinance an FHA loan: Final takeaways.

To answer your initial question, you absolutely can refinance your FHA loan. Whether or not you should, and which type of refinance is right for you, depends on your financial goals, your homeownership plans, and current market conditions. If you’re not sure where to start, our team is here to help.

If you want to refinance your FHA loan, there are two basic options: Refinance to a different loan type, or refinance to another FHA loan with new terms.

The post Can I Refinance an FHA Loan? What You Need to Know appeared first on Cardinal Financial.

What is an FHA Streamline Refinance?

FHA Streamline Refinance is a loan designed by the Federal Housing Administration to help homeowners make their FHA mortgage more affordable without the burden of an extensive qualification process. Easier qualification means an easier, simpler process for you, the homeowner.

Plus, it’s a win-win for the FHA. Since they already insure your mortgage, they presume there’s a lower chance that you’ll default. At the same time, they’re helping you get a better, more affordable loan.

What are the benefits?

The FHA’s streamline refinance program is loaded with benefits for borrowers who qualify. Here’s a quick list to give you an idea:

• Lower your rate and/or payment just like you would with a Conventional home loan refinance.
• Offered as a five-year adjustable-rate mortgage (ARM) or as a fixed-rate loan with a term of 15, 20, 25, or 30 years.
• Lower credit requirements. 
• Limited documentation. That means no income requirements, no proof of employment, no coughing up bank statements, and no asset verification required.
• No home equity? No problem. Unlimited LTV means you’re still eligible even if you have little or no equity in your home.
• No appraisal required.

How does an FHA Streamline work?

Of course, as with any money you borrow, some restrictions apply. For starters, there has to be a demonstrated net tangible benefit in a FHA Streamline Refinance transaction. Net tangible benefit means you can only do an FHA Streamline Refinance if it benefits you. Would a FHA Streamline Refinance lower your interest rate? Would it convert your current mortgage from an ARM to a fixed-rate loan? Put simply, would it leave you in a better position than before? Great! That’s the kind of borrower the FHA is looking to serve with their FHA Streamline Refinance program.

You can’t increase your loan balance to cover refinancing costs and your new loan cannot exceed the initial mortgage amount. When you do a FHA Streamline Refinance, your new loan amount is limited to the current principal balance plus the upfront mortgage insurance premium. That means you’ll either have to pay closing costs out of pocket or get a “no-cost” loan. And really, “no-cost” should actually be called “no out-of-pocket costs” because it means your lender agrees to pay the closing costs if you agree to pay a higher interest rate.

Are there any downsides?

If getting cash out of your home equity is your goal, an FHA Streamline Refi may not be right for you. Why? Because you can’t get more than $500 cash back for minor adjustments in closing costs.

Like your original FHA loan, an FHA Streamline Refinance still requires you to pay mortgage insurance in both a one-time, upfront mortgage insurance premium, which you pay at closing, and a monthly mortgage insurance payment.

How can I qualify?

Your mortgage must be current (not delinquent) when you apply for your FHA Streamline Refinance. You’re only allowed to make one late payment on your current FHA mortgage in the past year. And on top of that, your mortgage payments for the last six months must have been made within 30 days of their due date. Since FHA Streamline Refinances require less verification, this kind of payment history will show your lender and the FHA that you can responsibly pay off your current mortgage.

Finally, you must have made at least six monthly payments on the mortgage being refinanced, and the six most recent payments must have been made on time. In addition, at least six months must have passed since the first payment due. At least 210 days must have passed since the date you closed.

The bottom line

The most important thing to remember about an FHA Streamline Refinance is you can only qualify for this loan if you’re refinancing your current FHA mortgage to a new FHA mortgage. If you’re refinancing to or from a different loan type, this option is not available. The good news is that since you already qualified for an FHA loan when you bought your home, it’s almost guaranteed you’ll qualify for a new FHA loan when you refinance.

The post FHA Streamline Refinance: What It Is and How It Works appeared first on Cardinal Financial.

To help you narrow it down, let’s explore the types of mortgage refinances, as well as some financial alternatives.

5 Types of Mortgage Refinance Options and Alternatives

• Rate and term refinance
• Cash-out refinance
• Home equity line of credit (HELOC)
• Sell your home and downsize
• Turn your home into an investment property

Rate and term refinance

When most people think of refinancing a loan, they think of a rate and term refinance. This is the most traditional route, and for good reason. As the name implies, a rate and term refinance allows you to get a new rate and/or term on your mortgage. You may also be able to refinance to a different loan type that better meets your needs. 

For example, many homeowners start out with an FHA loan because it can be easier to qualify for as a first-time homebuyer. As they build home equity and grow their credit score, they may want to refinance to a Conventional mortgage so that they can drop monthly mortgage insurance premiums.

When is it a good idea?

Rate and term refinances are a great choice if you want to pay off your mortgage faster or take advantage of lower interest rates. 

Cash-out refinance

A cash-out refinance is when a borrower refinances their mortgage for more than the amount they currently owe and receives the difference in cash. They allow you to lock in a new fixed rate for the life of the loan and get predictable payments that make budgeting simple. Plus, all fees associated with the cost to borrow are paid upfront—no surprise fees down the road.

When is it a good idea?

If your goal is flexible funds, consolidating debt*, or financing home upgrades, a cash-out refi could be the right fit for you. Just keep in mind that unlike a rate and term refi, your monthly payment will likely go up, not down.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a refinance option that allows you to borrow against your home equity and use that to pay for miscellaneous expenses. It’s unique in the sense that the cash may be advanced to the borrower via a line of credit—like a credit card—rather than in a lump sum. You may have heard HELOCs more commonly referred to as second mortgages.

When is it a good idea?

Cash-out refis and HELOCS are similar. But, if your goal in tapping into home equity is for more flexible finances in general (rather than for a specific project like renovations) a HELOC might be a better fit.

Sell your home and downsize

Refinancing isn’t the only way to meet your homeownership goals. If your goal is to get cash from your home equity, selling your home might also be a viable option. In fact, you may even get more money back from selling your home than you would from refinancing. A smaller home may come with a smaller monthly mortgage payment, leaving you with more money in your pocket to pay for other expenses.

When is it a good idea?

This option could be right for you if you’re ready to downsize and current rates are more optimal than when you bought your current home. 

Pro Tip: For borrowers age 62 or older, a reverse mortgage is a way to leverage the home equity of your current home to reduce the cost of purchasing a new home.

Turn your home into an investment property

If you’re cash-strapped, flipping your home into an investment property might pay off more than refinancing. You could rent out a room, a floor, or the whole place if you’re away often. This option means you can keep living in your home, continue with your current mortgage terms, and make additional income at the same time. Renting out your home isn’t for everyone, though. And in some cases, using your home as an investment property may not be permitted by your existing mortgage, local government, or homeowners association.

When is it a good idea?

If you don’t mind people in your space, aren’t looking for new mortgage terms, and want to increase your cash flow, renting out your home could be the right choice for you.

Are there any other mortgage refinance options I should consider?

There’s no single right answer when it comes to refinancing or using your home to access more flexible finances. The right choice for you depends not just on your goals, but also on the current market rates. Whether you decide to keep your current terms, refinance, or take a different route with your home loan altogether, don’t rush a decision just because it seems like the next milestone you should reach. At the end of the day, homeownership happens at your own pace.

The right mortgage refinance type for you depends not just on your financial goals, but also on the current market rates.

The post The Best Mortgage Refinance Options and Alternatives appeared first on Cardinal Financial.

10 Tips for Refinancing a Home Loan

• Calculate your savings
• Consider your home equity
• Make a plan to pay off your loan
• Get to know the refinance process
• Get multiple refinance quotes
• Do the math before deciding to buy down your rate
• Factor fees and closing costs into your refinance budget
• Read your closing documents carefully
• Find small ways to cut costs
• Weigh the pros and cons of staying with your current lender or getting a new one

1. Calculate your savings

Will refinancing a home loan actually save you money? A simple budgeting tip for refinancing your home loan is to use a refinance calculator. It factors in your original loan amount, APR, and term; your new loan amount, APR, and term; and various fees associated with the transaction to come up with an estimated new monthly payment and savings. The right calculator can help you shop for the right loan, give you a good idea of what to expect, and calculate how long it might take you to recover from the costs of refinancing. Doing your own research can be beneficial, but keep in mind this is an estimate. You’ll have a better idea of your real payment and costs once you get in touch with a loan originator.

Pro Tip: Many Borrowers tend to think refinancing is all about the rate, but we recommend focusing on your savings (or, for cash-out refinances, the amount of equity you’re tapping into).

2. Consider your home equity

No matter your refinance goals, your home equity is key to reaching them. The more equity you have in your home, the easier it is to refinance. With the exception of a few loan programs, most lenders will verify that you have at least a small amount of equity in order to refinance. That doesn’t mean a lack of equity should keep you from applying though! There are loan programs, like the FHA Streamline refinance, that are built especially for homeowners with little to no equity in their homes. Ask your loan originator about refinancing options for homeowners with low equity if you think you’ll have trouble refinancing.

3. Make a plan to pay off your loan

Once you’ve decided that refinancing is a financially wise decision, it’s time to sit down and figure out how you’ll pay back the loan. Your long-term mortgage plans aren’t just about your rate. Talk with your financial advisor and come up with a plan to pay off the loan that leaves room for your other living expenses. Don’t rely on unpredictable income like tax refunds or employment bonuses to reach your payment goals. You can still use these to make additional payments, just think of them as a “nice to have” in your plan rather than essential.

4. Get to know the refinance process

Refinancing can be a quicker process than a home purchase, especially if you get a streamline refi. However, most of the steps of the process still apply. You’ll want to consult your loan originator before you take out a line of credit, change jobs, transfer large sums of money, or make any other major financial decisions. 

Pro Tip: Watch this video for an overview of the refi process.

5. Get multiple refinance quotes

Don’t be afraid to chat with a few different mortgage lenders and get a loan estimate from everyone you talk to. A loan estimate outlines the offer the lender is willing to make in detail, which allows you to make a clear comparison between offers so you can more easily decide which lender to choose.

6. Do the math before you decide to buy down your rate

These days, the average time an individual owns their home is often shorter than the time it would take them to recuperate the closing costs. If you choose to buy down your rate, there are many tools available online that can help you do the math. And, as always, your loan originator should be able to calculate this for you over the phone, so consider giving them a call.

7. Factor fees and closing costs into your refinance budget

When you’re refinancing a home loan, you have to pay many of the same fees you would with a home purchase. Property taxes, homeowners insurance, and closing costs are just a few of these fees. Make sure you set aside some money to cover these expenses at closing.

8. Read your closing documents carefully

Don’t just sign your closing documents—review them carefully. After all the moving parts of the refinance process have settled, it’s possible that there may be a mistake or two on your closing documents. Mortgage lenders are legally required to give you a closing disclosure before you reach the closing table. Take the opportunity to make sure these documents represent the offer you agreed upon at the beginning of the refinance process. 

9. Find small ways to cut costs

When it comes to lowering your refinance costs, every little bit helps. So, one of the most timeless tips for refinancing a home loan is to look for small ways to cut costs. For example, some lenders allow lower monthly payments when you opt-in to auto-pay instead of paying manually each month. Other potential ways to save could include:

• Timing your refi to the market. When rates are low, take advantage!
• Getting a streamline refi to avoid appraisal fees
• Avoid big purchases before applying to keep your credit score where you want it

10. Weigh the pros and cons of staying with your current lender or getting a new one

Deciding whether to stick with your lender or choose a new one for your refinance is up to you. On one hand, a new lender might be more incentivized to offer you lower rates. On the other hand, sticking with your current lender means they already have all your mortgage history available, which can help you speed up the process. And if you’ve taken out an FHA or VA loan and plan to refinance to the same loan type, your current lender can help you streamline your refi. This typically means less paperwork, no appraisal required, and faster turn times.

If all this sounds like a lot to consider, don’t worry! You made it through purchasing a home, and your refinance is within reach, too. And if you have any questions or concerns, we’re here to help.

The post 10 Tips for Refinancing Your Home Loan appeared first on Cardinal Financial.

So, is it better to get a HELOC or refinance your mortgage? Let’s break it down.

What is a HELOC?

To understand whether it’s better to get a HELOC or refinance your mortgage, it’s important to understand just what a HELOC is.

• A HELOC, or a home equity line of credit, is a loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the equity in your house. Think of it like a credit card that’s connected to your home equity rather than your bank account.
• A HELOC is often referred to as a lien on your home, or a second mortgage, because it’s another loan in addition to your first mortgage.
• HELOCs have their merits and are typically considered a secure form of debt, but you’ll see there can be a number of drawbacks to this type of financing depending on your circumstances.

HELOCs: The Drawbacks

So, if a HELOC is just a loan that lets you use your home equity, what could be the potential drawbacks? Well, for starters:

• Getting a HELOC means adding another monthly payment to what may already be a tight budget.
• HELOCs come with adjustable rates, which means payments will fluctuate—sometimes each month. This can make budgeting more challenging and put you at the mercy of the market market.
• You may have to pay different fees throughout the course of a HELOC, like an annual fee or inactivity fee.
• You’re required to pay interest on the money you withdraw. And although HELOCs offer the option of interest-only payments for a period of time, you risk making payments for longer than you need to.
• The interest you pay on HELOCs is only tax deductible* if it’s used to build on or improve the home that secures the loan.
• HELOC lenders only allow you to withdraw money during a predetermined “draw period.” Also, they typically enforce a minimum draw requirement. That means you have to take out the minimum required amount even if it’s more than what you need at the time.
• Since a HELOC is a loan secured by your home, if you’re unable to make payments on your HELOC, you risk losing your home.

While there may be some benefits to HELOCs, the risks can be high—even for lenders. That’s why HELOC lenders are pulling back on offering this type of financing.

So, with fewer lenders offering HELOCs, how do you get cash to renovate your home in the current market?

*This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

HELOC vs. Cash-Out Refinance

Cash-out refinance to the rescue. Here’s what it all boils down to: Why get credit when you can get cash? After all, it’s your hard-earned home equity on the line. That’s why cash-out refis can be a smart solution for homeowners who want to leverage their home equity. Take a look at the benefits.

• With cash-out refinance, you refinance a your mortgage for more than what you currently owe and pocket the difference in cash. It’s one monthly payment—no separate loan!
• A fixed-rate equals predictable payments, making budgeting easier and less stressful.
• All fees for a cash-out refi are collected up front, and interest rates are typically lower than that of HELOCs.
• No draw periods, no minimum draw requirement, and no extra interest-only payments. The only caveat is lenders limit how much cash you can take out to keep you from tapping into 100% of your home equity.

So, is it better to get a HELOC or refinance?

As in all things mortgage, the right choice depends on your goals. Overall, a cash-out refinance tends to be a less risky (and more widely available) way to leverage your equity than a HELOC. Keep in mind that a cash-out refi typically means you’ll have a higher monthly mortgage payment. When it comes to financing home renovations, a cash-out refinance can help you cover those upfront costs like materials and labor all at once. With a HELOC, the limited amount you can draw from your line of credit at a time might not be conducive to paying for home projects.

The bottom line

Figure out your financial goals before you decide if it’s better to get a HELOC or refinance. Luckily, our loan originators are here to help you do just that.

Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

Is it better to get a HELOC or refinance? While there may be some benefits to HELOCs, the risks can be high—even for lenders. A cash-out refi tends to be easier to qualify for.

The post Is It Better to Get a HELOC or Refinance Your Mortgage? appeared first on Cardinal Financial.

What kind of refi should I get?

At the very beginning of the refi timeline, you’ll be faced with a fork in the road: rate-and-term or cash-out.

With a rate-and-term refi, you’ll get a new (you guessed it) rate-and-term without advancing any new money. If you’re looking to lower your monthly payment or pay off your mortgage sooner, a rate-and-term could be the right fit for you. After all, a lot could’ve changed since you first bought your home and you may qualify for better terms now than you did before.

Speaking of home equity, a cash-out refi* lets you turn that equity into cash. Keep in mind that because you’re taking cash out, you could end up with a higher monthly payment to cover this. If you’re looking to build even more equity with upgrades like a kitchen remodel or pool, a cash-out refi is a great way to fund those home improvements.

So, if you want a lower monthly payment, a rate-and-term fits the bill. If you want to leverage your home equity for more flexible funds, a cash-out could be the better option for you.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

How do I start the refinance process?

The first thing you’ll do is reach out to your lender (or a few lenders if you want options) for a rate quote. You could have your quote within minutes, but take a few days to consider your options. With your lender chosen and quote in hand, it’s time to apply for your refi.

During the application process (which typically takes a few days to a couple of weeks), you’ll need documentation similar to what you provided for your purchase: recent pay stubs, W-2s, and bank statements to name a few. Once you’ve applied, your lender will put together some options for your new rate, then you’ll lock in your best fit.

In the next few weeks, your lender will verify and review all the information you provided in the application, just to make sure everything is accurate. This is called underwriting, and it’s also the point in the timeline where you’ll need a refinance appraisal.

Why do I need a refinance appraisal?

A refinance appraisal is key to qualifying for the new rate you want, and for determining how much cash you can actually get in a cash-out refinance. Over the life of your mortgage, your home has been building equity, whether that’s from upgrades you’ve made like installing new appliances or external factors like the housing market. An appraisal will tell you just how much value your home has accrued since you bought it.

At this point, your lender will order the appraisal for you, the appraisal company will send someone to assess your home, and you’ll get a professional estimate of its value. Depending on how fast the appraiser gets back to you, the whole process could take a few days to a couple of weeks.

Some refinance types, like a VA Streamline Refi (also known as an IRRRL or Interest Rate Reduction Refinance Loan) or an FHA Streamline Refi, won’t require an appraisal. These refinance loans are available if you’re refinancing from a VA loan to a new VA loan, or from an FHA loan to a new FHA loan. With a streamline refi, you’ll enjoy a faster process and less paperwork.

I got my refinance appraisal. What’s the refi timeline from here?

You’ve got your appraisal, which means you’re almost done. A few days before closing, your lender will send you closing disclosures. You should review these carefully to make sure everything is correct and ready to be finalized. Once you’ve reviewed the documents, your lender will help you set up a time and place for closing. You, your co-borrowers if you have them, and a lawyer or closing agent will need to be there.

On the big day, you’ll sign the final documents and pay any costs that haven’t been rolled into your new mortgage loan. If you’re getting a cash-out refi, you’ll receive the check at or within three business days of closing.

And that’s it! From rate quote to close, the whole process typically takes 30-45 days. The turn time between submitting your application and getting approved could take anywhere from a few hours to a few days, depending on how complex your loan is.

How soon will I need another refi?

While there’s no limit to the number of times you can refinance your home, you should wait at least long enough for something significant in your finances or the housing market to change. That could be any number of things, including reducing your debt-to-income ratio (the percentage of your monthly income spent on debt payments), building your credit score, or completing home upgrades.

So, how soon you’ll need another refi is different for everyone—you might never need to, or you may find yourself refinancing as early as six months down the line. Just remember that you’ll have to pay all the fees and closing costs associated with the process each time.

From rate quote to close, the home loan refi process typically takes 30-45 days. A dependable lender will make sure you’re in the loop for each and every one of those.

The post The Refi Timeline appeared first on Cardinal Financial.

There’s actually a simpler way to do it. And you’ve earned it. A VA IRRRL Streamline Refinance is reserved for veterans (and other qualifying applicants) like you. 

Insider tip: if you hear it called a VA Streamline Refinance, don’t worry. Different name. Same exact thing.

What is a VA Streamline Refinance?

What is VA IRRRL? Glad you asked.

The U.S. Department of Veterans Affairs (VA) offers Interest Rate Reduction Refinance Loans (IRRRL). This home loan refi transfers an existing VA loan to a new VA loan, with a few added benefits.

The program allows people with existing VA loans to:

• lower their interest rate
• lower their monthly payment
• move their loan from an adjustable-rate mortgage to a fixed-rate mortgage

You might even be able to do all three. The coolest part? A VA IRRRL simplifies the refi application process. A Streamlined Refinance often requires less paperwork and usually takes less time to process.

Plus, you might be able to avoid an appraisal altogether.

In a nutshell, a VA Streamline Refinance helps you save money on your VA home loan without all that time and effort.

Terms You Should Know

• Adjustable-rate mortgage (ARM) – A mortgage loan with an interest rate that may go up and down over the life of the loan.
• Fixed-rate mortgage – A mortgage loan with an interest rate that stays the same for the life of the loan.
• VA Interest Rate Reduction Refinance Loan (VA IRRRL) – An easier mortgage loan refi option for current VA mortgages that lowers the existing interest rate. It can also convert the mortgage loan from an ARM to a Fixed Rate mortgage. Also referred to as a VA Streamline Refinance.

Do I qualify for an IRRRL?

Ok. You’re ready to lock in a lower mortgage rate with a VA IRRRL. But can you get one? You might qualify for this type of refi if:

• You have an existing VA home loan
• Your new interest rate will be lower than your existing one, OR you currently have an adjustable-rate mortgage
• You live in (or previously lived in) the home with the loan

Have questions about whether you qualify? No problem. Just reach out to a home loan expert. They’ll help you determine if you’re a good candidate. They can even give you a savings estimate.

Pros and cons of a VA Streamline Refinance

You’re probably thinking about what a smart move an IRRRL could be. And you’re right! There are tons of benefits to this type of refi:

• It’s quicker and easier than a conventional refi. That’s because there’s typically no appraisal, employment verification, or credit reporting required.
• Since you’re going from one VA home loan to another, interest rates are super competitive.
• You could save money monthly AND in the long run.
• You probably won’t have to pay extra just because you don’t have enough equity in your home.*

*Conventional mortgages usually include an extra fee for borrowers with less than 20% of the loan value to invest up-front. This is called Private Mortgage Insurance (PMI). One of the great things about VA home loans is that they don’t charge you for PMI. So, if you get a VA Streamline Refinance, you won’t have to worry about this extra expense.

Yup, VA IRRRLs are amazing. But, they do have just a few potential downsides:

• You can’t use a VA Streamline Refinance to get cash out. It’s only used to reduce payments and/or the interest rate.
• Most people have to pay a 0.5% funding fee.

A few more things about the VA funding fee

Yes, a funding fee can be a pesky part of any home loan refinance. But, these things can make the 0.5% pill a little easier to swallow:

• You can roll the 0.5% into the loan amount, meaning you pay the fee in small increments monthly. Just remember, you’ll pay interest on the fee if you do it that way.
• The Department of Veterans Affairs gets all proceeds from this fee. So, your refi helps support VA home loan programs for future borrowers.
• Some refi-seekers don’t need to pay the funding fee. To see if you can get a fee exemption, contact your mortgage professional.

So, you could save money with way less hassle? Yup. The VA IRRRL could make that happen for you, and Cardinal Financial is standing by to help. If current VA interest rates are lower than the one you have, this could be your best move yet. Well, second to buying your home, of course.

Reach out to our friendly team today for a savings estimate.

In a nutshell, a VA Streamline Refinance helps you save money on your VA home loan without all that time and effort.

The post What is a VA Streamline Refinance? appeared first on Cardinal Financial.

Should I refinance my mortgage? Top 5 reasons to refi

• Lower monthly payments
• Consolidate debt
• Get cash on hand
• Pay off your mortgage faster
• Gain stability

Different types of refinances can help you reach these goals, and some may be better than others for what you have in mind. To understand what’s right for you, let’s break down each benefit of refinancing your mortgage.

1. Lower monthly payments

A lower monthly payment may be the biggest benefit of refinancing a mortgage, but it only works if your new mortgage rate is lower than your original rate. Otherwise, your payment could go up. If you’re interested in refinancing, be sure to keep an eye on the most current rates. Even a small difference in percentages can have a sizable impact on your monthly payment. In addition to decreasing your monthly payment amount, reducing your interest rate can help you save money in the long term and build equity in your home faster.

If lowering your monthly payment is your top priority, a rate-and-term refi is likely the best fit.

2. Consolidate debt

Your debt situation is one of the main factors to consider when refinancing a mortgage. If you have debt in multiple areas, refinancing could help you consolidate it.* Using this method, you can replace multiple loans with one loan, leaving you with one convenient monthly payment. If you’re going to have debt, you might as well make it as simple as possible to deal with, right? The key here is not to accrue new debt once the refinancing has consolidated your old debt.

If debt consolidation is your goal, a cash-out refinance may be your best bet.

*Using your home equity to pay off debts or make other purchases does not eliminate the debt or the cost of the purchases, but rather increases the loan amount of your mortgage to be paid according to your new mortgage terms.

3. Get cash on hand

Want access to more flexible funds? A cash-out refinance can help. This type of refinance allows you to tap into your home’s equity and turn it into cash. Borrowers who refinance often use this money for remodeling or landscaping projects. How does it work? Refinance your existing mortgage into a new one for a larger amount and pocket the difference (minus closing costs). But be advised—lenders usually limit the loan amount of this type of refinance to 80 percent of your home’s equity.

4. Pay off your mortgage faster

If you plan on staying in your current home for a long period of time, it may be a good idea to refinance your mortgage to obtain a shorter term. For example, you may want to refinance your 30-year loan into a 15-year loan. Although your monthly payments will increase, you’ll save money on your overall interest payments and own your home, free of mortgage debt, in half the time. 

When paying off your loan sooner is the goal, a rate-and-term refi is usually the right move.

Pro Tip: Use our refinance calculator to see how much a refinance could save you.

5. Gain stability

Most people don’t like surprises when it comes to money. If you’re one of those people who like to know what’s coming ahead of time, refinancing your mortgage could be a perfect fix. One of the pros of refinancing is it can be a great solution for borrowers who are struggling with financial stability. If you started with an adjustable-rate loan, refinancing into a fixed-rate loan can help you make steady payments—especially if you are concerned with inflation and the resulting possibility of higher monthly payments.

Are there any other reasons I should refinance my mortgage?

Everyone’s situation is unique, so your reasons to refi may be different than what we’ve discussed here. One benefit of refinancing your mortgage that sometimes gets overlooked is financing home upgrades. Whether you want to use the cash from a cash-out refinance for this or refinance to a renovation home loan, your mortgage can do more for you than you might think. Reach out to a loan originator anytime to explore your options.

Lower monthly payments are just one of the many great reasons to refinance your mortgage.

The post Should I Refinance My Mortgage? 5 Reasons to Say “Yes” appeared first on Cardinal Financial.

What Is a CEMA Loan?

CEMA stands for Consolidation Extension and Modification Agreement. For homeowners in the state of New York who are looking to refinance, it’s a process that can help them save money on their mortgage taxes. 

• Consolidation means the combining of two mortgages (the existing mortgage and the gap mortgage) into one.
• Extension refers to the note, aka the document you sign at closing that details your loan terms. If the mortgage has less than 30 years left on it, it will likely be extended to match the term of the new loan. 
• Modification means that the terms of the old mortgage are being modified through the CEMA according to the terms of the new loan.

Wait, what’s a gap mortgage? When you’re refinancing your home loan, you’ll have the principal unpaid balance (PUB) on the existing loan and the “gap” amount. The gap amount is the difference between the PUB and the new loan amount. The PUB is secured by the existing mortgage and assigned to the new lender. The gap amount, however, is secured by the gap mortgage, which is recorded after closing. In the end, both mortgages are consolidated to form one lien through the CEMA.

Why get a CEMA loan?

CEMA loans can help homeowners in the state of New York avoid paying all or some of the mortgage tax on their refinance. Especially if your tax savings outweigh the cost to get a CEMA, you could save some serious cash. Savings are based on the mortgage tax rate in the borrower’s county, the principal unpaid balance on their existing loan, and the fees they incur in obtaining the assignment. The assignment is required and charged by the borrower’s payoff bank in order for the CEMA to take place.

In the mortgage world, assignment is when the original lender transfers the loan to a new lender. This means your payments will start going to that new lender. When you close on your home loan, you may be asked to sign a document that gives your lender the right to assign your mortgage to a different lender. Even though the lender changes when your mortgage is assigned, the terms you agreed to when you closed on the loan won’t change.

What are the downsides to a CEMA loan?

If you opt for a CEMA loan when you refinance your mortgage, you may have to pay an upfront fee to initiate the CEMA, and it may not be refundable. This can be a drawback to borrowers, especially when you’re refinancing—and doing a CEMA—to save money. For some, it can feel like one step forward, two steps back. But, if the tax savings outweigh the cost of the upfront fee, it may still be worth it.

How does a CEMA loan refinance work?

When you take out a home loan, you’ll need to file the mortgage deed with your county. This is called recording. When the mortgage is recorded, the mortgage tax is assessed. The majority of the time, the existing loan in a refinance transaction is paid in full. Once the old lender is paid off, they will provide a satisfaction for the mortgage, or “discharge” it. In New York, when you satisfy a loan upon payoff and record a new mortgage under a new lender, you will incur a mortgage tax on the full amount of the new mortgage.

If the old lender is willing to assign the mortgage to the new lender, the borrower doesn’t need to record a full-on new mortgage. In that case, they really only need to record a mortgage for the difference between the loan amount and the PUB. This is typically a much smaller amount, therefore, the tax is much less.

The key to the CEMA loan process is that the existing lender assigns the mortgage to the new lender instead of satisfying it. In other words, you don’t pay off the current loan and take out a new one like you would in a typical refinance. Instead, the debt is simply transferred to a new lender, but it is still the same loan. This is why CEMA loans are sometimes called “New York Assignments.”

How to calculate your CEMA loan refinance

The money you can save with a CEMA loan can be calculated like this: Take the principal unpaid balance from your current home loan and multiply that number by your county mortgage tax rate. From that, subtract the bank and recording fees. Your loan originator or financial advisor can also help you crunch the numbers.

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before making the decision to buy or refinance a home.

CEMA stands for Consolidation Extension and Modification Agreement. If you’re a New York homeowner looking to refi, it can help you save money on your mortgage taxes.

The post CEMA Loans: What to Know Before You Refinance in New York appeared first on Cardinal Financial.

SPEAKING WITH YOUR FINANCIAL ADVISER IN ADDITION TO YOUR MORTGAGE LENDER IS THE BEST WAY TO HELP YOU ANSWER YOUR REFINANCE QUESTIONS AND DECIDE IF YOU’RE IN A POSITION TO REFINANCE YOUR HOME LOAN.

There are several different ways to refinance your mortgage and each has its merits. To know which refinance method you should choose you’ll have to ask yourself some questions. You’ve got plans; now you just need to figure out how to get there. And it’s important to note that your plans will largely dictate the type of refinancing that’s best for you. Here, we’ve listed seven refinance questions to get your mind moving in the right direction—and to prepare you for future conversations about it with your lender.

1. how long do I plan on living in my current home?

How long you plan on living in your current home is a crucial factor when picking the optimal time to refinance. You’ll want to calculate when you’ll break even, because when you break even, the savings finally outweigh the costs. (Not sure when you’ll break even? Use our refinance calculator to find out.) For example, let’s say you plan on living in your home for at least five years and, based on your calculations, you expect to break even at 17 months. In that case, it’s probably worth it to stay in your home and reap the savings.

2. am I trying to lower my interest rate?

Currently, rates are on the rise, so if you bought your house in the last few years, it probably won’t save you any money to refinance now. However, if you purchased your home more than a decade ago and have not refinanced in the last 10 years, rates are probably low enough for a refinance to make sense. In the case of trying to lower your mortgage interest rate, you’ll want to check with your lender—they’ll be able to tell if you can get in at a lower rate.

3. do I want to pay off debt?

Trying to pay off other debt? Refinancing could free up some money you’d normally put toward your monthly mortgage payment. Have you heard of cash-out refinancing? With a cash-out refinance, you could borrow against your home equity and pay off some debt. Cash-out refinancing is also a popular option for homeowners looking to consolidate debt. If you have debt in multiple areas, a cash-out refinance would combine all of it into one convenient payment, giving you more disposable income.

4. should I tap into my home equity to make a big purchase?

Fourth on our list of refinance questions to ask yourself is about equity. Are you looking to make a big purchase in the near future? Maybe you have your eye on a new car or new furniture. Did you know you could fund that purchase with your home equity? Or maybe your kid is going off to college in the fall. You could refinance and put that cash from your home equity toward tuition, books, or school supplies. Got landscaping or home renovation plans? You could pay for those plans debt-free by refinancing your mortgage and tapping into your home equity. Sounds great—we know. But here’s the kicker: you can only borrow against your home equity up to 80%, meaning you have to retain at least 20% equity in your home after you refinance.

5. should I use my home equity to invest in a rental property?

We get it. You got bit by the investment bug. In this year’s competitive market, it might seem appealing to dive into all the excitement and purchase your own investment property. There’s good news! You could refinance and put your home equity toward buying a rental property. Especially when you’re trying to make money off this property, using your home equity to buy it in the first place only helps to offset the costs. Bet you didn’t know you could do that with a home loan refinance!

6. do I want to shorten my loan term so I can own my home debt-free, sooner?

Is 30 years too long for you? Just can’t wait that long? If you’re itching to get rid of your mortgage debt sooner, you could refinance for a shorter term. This is a popular option for older borrowers who are eager to own their home debt-free for some time and are planning on passing it down to children or grandchildren. But, if that’s not the life stage you’re in, you might just want to enjoy the benefits of a mortgage payment that’s only made up of taxes and insurance. It’s still a mortgage bill, but one that’s significantly cheaper, giving you more financial wiggle room!

7. am I in a position to take on costs associated with refinancing?

If, after you’ve asked yourself all of these refinance questions, everything sounds great so far, we have one more question for you: can you afford the costs associated with refinancing? It almost seems counterintuitive that refinancing to save money would cost you money, but remember the refinance process is similar to purchasing a home in that there are still various fees associated with the transaction. Things like appraisal fees, title fees, and closing costs still apply. No, you’re not having to come to the closing table with a big down payment, but you will have some up-front costs to pay. Good thing Cardinal Financial is on your side. If you’re a Cardinal Financial customer, ask us about fees we waive for our repeat customers!

In sum, this list of refinance questions is not exhaustive, but it should at least provide a starting point and get you thinking in the right direction. Check out our other refi blog posts below for additional insight!

Know a friend or relative who needs to ask themselves these refinance questions? Share it with them on social media!

The post 7 Refinance Questions to Ask Yourself appeared first on Cardinal Financial.

Homeowners: Close your eyes and picture your house. Got it? OK, now imagine it again, this time as a giant piggy bank with a roof, a chimney, a front door—the works. What if we told you that this isn’t just your imagination, it’s a metaphorical possibility: You could transform your home equity into cash with a cash-out refinance. Are you curious? Read on.

What is a cash-out refinance?

Refinancing is the process of replacing your original home loan with a new one, that may include a new interest rate and loan term. Refinancing can help you consolidate your debt, gain financial stability, oftentimes lower your interest rate, potentially pay off your mortgage sooner, and even get cash out. If those are benefits that catch your attention, stick with us here because it’s about to get interesting.

A cash-out refinance happens when the borrower refinances for more than the amount owed and pockets the difference. This allows you to tap into your home’s equity and turn it into hard cash. Now we’re talking.

What is equity?

If equity is one of those financial terms that you’ve heard before but don’t quite understand, allow us to define it for you: Home equity is the value of a house or property that represents the current market value of the house against its remaining mortgage payments (not including interest). This equity would increase over time if the market value of the property appreciates and as mortgage payments continue to be made.

Let’s break it down even more. Seven years ago, you bought your house for $100,000 and now it’s worth $200,000. You could refinance the house and take cash out for it now that it’s worth more than it was seven years ago.

Even though we’re talking about home equity, don’t confuse a cash-out refinance with a home equity loan or a home equity line of credit (HELOC). These seemingly overlapping terms are actually quite different. A home equity loan or line of credit is its own lien on the property (this would be in addition to your current mortgage if you have one already. Neither of these replaces or changes the terms of your current home mortgage). Conversely, a cash-out refinance is a loan that would replace the terms on your current mortgage. All of these options give you a chance to consider taking advantage of potentially better loan terms with the additional equity that has been accumulated.

What are the benefits?

In the midst of this giving season, debt consolidation sounds pretty attractive—and it’s a major benefit to cash-out refinancing that entices many homeowners. Take advantage of other benefits to this kind of refinance and make practical improvements to your home, like installing a new furnace, replacing a broken dishwasher, or fixing damaged parts of your roof.

If you’re looking to make your home a little more visually appealing, use your cash-out refi to remodel your master bathroom or get those butcher block countertops that are so popular right now. If you wait until the spring to do a cash-out refi, you could pay to have those unsightly shrubs removed from your front lawn or start building that dreamy pergola you’ve always wanted.

You can use the cash from your cash-out refinance any way you want, but many refinancers use this money for home improvement projects like landscaping or remodeling.

What’s the catch?

While cash-out refinancing may sound like music to your ears, we can’t call it a perfect solution. Be advised that lenders usually limit the amount of equity that you can take out of your home. Give us a call to find out if you should take advantage of a cash-out refinance.

The post What You Need to Know About Cash-Out Refinancing appeared first on Cardinal Financial.