Home Refinance: Why It's Right For You!

These are tough times. Money is tight for many Americans, and every dollar counts. If you’re trying to think of ways to stretch your budget and have equity in your home, you might consider a refinance home loan.

With interest rates so low, rate refinancing could lower your monthly payments substantially. Term refinancing, on the other hand, will probably increase your monthly payments, but you’ll have your mortgage paid off a lot sooner. You’ll be saving money either way, in the short term or the long term.

If you’ve never considered a refinance home loan before, here are some things you need to know.

Home Equity Vs. Refinance

Which one is right for you? The answer to home equity Vs. refinance depends on your goals.

If you bought your home 10 years or more ago you probably have an interest rate in the 5% range - if you have a fixed-rate mortgage. With rates at about 3.5% in 2020, refinancing could save you a lot of money.

If your interest rate is already low, and you are planning some major repairs or a renovation, you want to turn your equity into cash with a home equity loan.

Your Credit Score Matters

To get the best home refinance rates, you will need a credit score of 680 or above with less than 25% equity. If you have more than 25% equity and a debt-to-income ratio below 36% you should get the best home refinance rates.

For a standard FHA home refinance, you need to have a minimum FICO score of 500 for an LTV below 90% and a FICO score of 580 for an LTV of more than 90%.

Refinancing a VA Loan

A VA home loan refinance is possible if you already have a VA loan and the home is your primary residence. A minimum credit score, minimum income, appraisal, and no late payments for one year may be required. You might be able to finance 100% of your home’s appraised value with a VA home loan refinance - cash out.

How to Use a Home Refinance Calculator

You can find out if a refinance can help you by using a home refinance calculator. Zillow has a home refinance calculator that will show you what your monthly savings will be as well as your lifetime savings. You will need your current loan amount, interest rate, term, and the year the loan originated to get an accurate calculation.

How to Get the Best Refinance Home Loans
There are benefits to working on a refinance loan with your current lender. You already have an established relationship with the lender and might be able to negotiate lower fees if you’ve been a good client and the lender has a vested interest in keeping you. Check out the calculator here.

The process will be simplified because your lender already has your information. You may be able to get to a closing faster than the 40 days it normally takes to finalize the best refinance home loans.