No one likes to be in debt. As homebuyers, we know that being in debt is likely unavoidable for several years; after all, buying a house is no small expense.
We also know that paying an expensive mortgage payment each month when you want to be saving is discouraging, especially if it's for property that we've already left behind due to a PCS move. This is why it might be time for you to consider refinancing your mortgage and getting your property paid off sooner.
What Is Refinancing?
Put very simply, refinancing is replacing an existing debt with a new one under different terms. As SF Gate says, “Refinancing trades the original loan for another loan with rates and terms that better serve the financial interests of the homeowner. Borrowers can choose between 15- and 30-year terms, and fixed vs. variable interest rate loans.”
When to Refinance Your Home
Many people choose to refinance their home in order to receive a bit of their accrued equity to increase cash flow or pay off another debt. However, financial expert Dave Ramsey notes, “The time to refinance is when you want to make a less-than-desirable mortgage better, not when you want to buy something with that money.” This means that refinancing your mortgage is most recommended if you qualify under any of these five categories:
- You have an adjustable rate mortgage. Adjustable-rate mortgages, or ARMs, have monthly payments that can move up and down as interest rates fluctuate. These rates start lower than a fixed-rate but have the tendency to increase over time, surpassing the fixed-rate and costing you more money in the long-run. For this reason, it might be best to refinance and commit to a fixed-rate mortgage.
- You have an interest-only loan. An interest-only loan is a type of mortgage in which the mortgagor is only required to pay off the interest that arises from the principal that is borrowed. While this type of loan allows you to buy a home without committing to large payments initially, it means that your monthly mortgage payments do not actually chip away at your overall house payment, but only the expense created by borrowing money to afford your home. Refinancing will allow you to get a mortgage payment that may be more than you're paying now, but will get you progressing on your overall debt.
- Your house note goes is longer than 15 years. A house note is simply a written promise to repay a specified sum of money plus interest at a specified rate and length of time. Since the goal is to pay off your debt quickly and efficiently, committing yourself to 30 years of payments may not be ideal. Refinancing to get out of this scenario will shorten your time in debt.
- You have a high interest rate. A low credit score may have qualified you for a high interest rate when you purchased your home. If this is the case and you've had a chance to raise your credit score, it's a good time to consider refinancing your mortgage to a better rate.
- You meet any of the above qualifications and your property is a rental. Refinancing your rental property may give you the opportunity to increase your monthly income. For example, by refinancing your property to a lower mortgage rate each month, you'll be paying less out of pocket until the house is paid off. If you're renting out the property, you're in charge of the rental agreement and the price at which you list the rental. So, in theory, your current rental rate could gain you more monthly income with a refinanced mortgage.
How to Refinance Your Home
As active duty or retired military families, refinancing your home is easier than ever with the VA Loan. According to Veterans United, “In 1944, the U.S. government created a military loan guaranty program to help returning service members purchase homes. The result, the VA Loan, is a mortgage loan issued by approved lenders such as Veterans United Home Loans and guaranteed by the federal government.”
The loan applies to veterans, active duty service members, and even military spouses whose spouse died while active or a disability acquired from years active duty. To see if you qualify, visit VA Loan Eligibility.
If your mortgage is currently through another financial institution, you may still be able to refinance through Veterans United. Talk to your representative and discuss moving your loan to Veterans United to pay a potentially lower rate. They are there to help you successfully refinance your home, whether it is the residence you currently reside in or your rental property.
Armed with information, you may feel that it is time to refinance your mortgage. Call Veterans United and start the process of refinancing your mortgage today!
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