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Refinancing Your Mortgage

Q: When should I refinance my mortgage?

You should consider refinancing if you want to take advantage of low interest rates, if you’re thinking about making home improvements or if you’re looking to consolidate your other types of debt. This may also be an option for you if the equity in your home has increased, your financial situation has changed, if you have high-interest credit card debt you’re looking to pay off or if your credit has improved.

Q: What does refinancing cost?

Typically the closing cost of refinancing is between 1% and 2% of the loan amount with lender fees included.

Q: Can I refinance 100% of my home value?

In rare cases, yes, but it’s best to consult a Blue Water mortgage expert. Most people who are refinancing have equity in their home to help them with the refinance.

Q: How long does the refinance process take?

The process typically takes anywhere from 30 to 45 days, but every situation is different and can be shorter or longer. The length of time may also depend on your property’s size and the current state of your finances.

Q: What is the 2% rule, and is it useful?

The 2% rule states that you should aim for a 2% lower interest rate in order to ensure that the savings generated by your new loan will offset the cost refinancing, provided you’ve lived in your home for two years and plan to stay for at least two more.

Q: What is cash-out refinancing?

Cash-out refinancing is when you borrow more money than is owed on your existing mortgage, and you receive the difference in cash. Some borrowers choose this option to finance home improvements, pay off credit card debt or pay for college expenses.

Q: What do I need to start the refinancing process?

The process of refinancing your mortgage will be similar to when you applied for your first mortgage. First, you should obtain quotes from lenders and see what you prequalify for. Once you’ve determined that refinancing is an option you’d like to pursue, you’ll need to provide specific documents to the lender to begin the application process for the new loan.

Should I Refinance My Home? There’s Never Been a Better Time

Thanks to historically low interest rates, this is an ideal time to consolidate debt and get some extra money in your pocket by refinancing your home. Get in touch with us to see if refinancing makes sense for you right now. Our team is plugged in and ready to help — just grab your mortgage statement and schedule a call with Blue Water today.

What is Refinancing?

Refinancing is when homeowners take out a new home loan to replace their existing one. The new loan then pays off the initial mortgage loan. Depending on your goals, refinancing your home loan can reduce your monthly payments and help you realize significant, long-term savings.

When Is It Worth Refinancing? 7 Factors to Consider

You may be asking: Should I refinance my home? Here are 7 factors you should consider if you’re thinking about whether refinancing makes sense for you:

You want to take advantage of low interest rates.
You have high-interest credit card debt you are looking to pay off.
The equity in your home has increased and you might be able to get rid of PMI.
Your financial situation has changed. Have you changed careers or received a salary increase?
You’re looking to consolidate your other types of debt, like another mortgage, student loans or car loans.
You’re thinking about making home improvements or repairs.
Your credit has improved, meaning you may be able to get a better rate even if rates haven’t gone down.

Benefits of Refinancing a Home Loan

Refinancing presents a great opportunity to get a new mortgage that’s better suited to your current lifestyle and financial position. Some of the major benefits of refinancing include:

Reduced loan terms

Refinancing will also update your loan terms. This can mean moving from a 30-year loan to a 25-year loan so that you can pay off the loan and own your home quicker. By reducing your loan terms, you are also lowering the amount of interest you must pay your lender.

See Refinancing Loan Example #1 below

Lowered monthly payments

When you finalized your initial loan terms, you agreed on a specific interest rate (fixed or adjustable) attached to the borrowing amount. Refinancing involves lowering that interest rate, thereby reducing the amount of interest you will pay on the principal.

See Refinancing Loan Example #2 below

Long-term savings

With lower monthly payments and a reduced interest rate, refinancing can bring substantial long-term savings. Plus, consolidating all your debts when you refinance can make it easier to manage your finances.

See Refinancing Loan Examples below

What Are the Costs Associated With Refinancing?

Refinancing makes sense if you plan to stay in your current home for a long time, but the process does come with some costs. The main ones include:

Origination fees including application, points, and lender fees
Title search and insurance
Brokerage fees
Setting up a new escrow accounts
Appraisal credit report

To obtain a quote on what your fees would be, contact Blue Water today.

Refinance Loan Scenarios

Current Loan

Term: 30 year fixed rate loan
Rate: 4.25%
Original Loan amount: $400,000
Current Loan Balance: $390,000
Total payments made on current loan: 18
Principal and Interest Payment: $1,967.76

New Loan Scenario #1

Term: 25 year fixed rate loan
Rate: 3.75% APR: 3.78%
New Loan Amount: $390,000
New Principal and Interest Payment: $2,005.11
Life of Loan Savings: $71,000
Additional Benefit: 3.5 years off current loan term

New Loan Scenario #2

Term: 30 year fixed rate loan
Rate: 3.75% APR: 3.78%
New Loan Amount: $390,000
New Principal and Interest Payment: $1,806.15
Monthly Savings: $161.61
Life of Loan Savings: $22,000

10, 15 & 30-Year Fixed Rate Mortgages in NH, MA, ME, VT, CT, RI, NC, CO, FL, TX, GA & SC

Fixed rate mortgage loans maintain a fixed interest rate for the entire life of the loan, as opposed to loans where the interest rate may be adjusted.

Refinance Home Loan Rates: State-by-State Comparison

Blue Water Mortgage is licensed in New Hampshire, Massachusetts, Maine, Vermont, Connecticut, Rhode Island, North Carolina, Colorado, Florida, Texas, Georgia, and South Carolina. While the home loan refinancing process is similar across the country, there are a few differences:

New Hampshire: You can use a title company for closing.
Massachusetts: You are required to use an attorney for the title work and closing.
Maine: Turn times can vary depending on third-party services like appraisals.
Connecticut: Due to quarterly tax billing, you can expect to only work on 2-4 months for escrow.
Florida: You will incur some additional transfer taxes that you won’t find in other states.

Refinancing Adjustable-Rate Mortgages vs. Fixed Rates

An adjustable rate mortgage, also known as a variable rate or tracker mortgage, is a mortgage with an adjustable interest rate. Even though ARMs will have a varying interest rate over the loan’s lifespan, they do have a period in the beginning where you will see consistent, fixed payments and lower initial interest rates. This period can last anywhere from one month to several years. An ARM starts lower but can quickly rise above the fixed-rate mortgage (FRM) in the long run. An ARM is a good short-term solution, but not necessarily a good long-term option.

After this period, the rate will adjust at a pre-determined frequency, which is fixed for a certain number of years and then adjusts every year thereafter.

An FRM maintains the same interest rate throughout the loan’s lifespan, which protects you from monthly mortgage payment increases due to rising interest rates. The amount you will pay monthly depends on your mortgage terms.

With an FRM, you will have to refinance if you want to take advantage of falling interest rates.

Adjustable Rate Mortgages

Jumbo (Non-Conforming)

Jumbo loans exceed the loan limit set by Fannie Mae and Freddie Mac.

Learn more

Non-Conventional

Private lenders offer unique products for borrowers who may not qualify for conventional loans. Learn more about loans for borrowers whose credit is less than perfect.

Learn more

First Time Home Buyer

By definition, a first time homebuyer is someone who hasn’t owned a home in the last 3 years. We know this process can be intimidating. Let us help you navigate it.

Learn more

Low Down Payment

Need a loan but don’t have the reserves for a high down payment? Read about our low down payment options.

Learn more

Opening a Line of Credit to Access Home Equity

You can also open a home equity line of credit (HELOC) in order to secure a lower rate. A HELOC is typically taken out in addition to your existing mortgage, which is why it’s often considered a second mortgage. This enables you to access the loaned funds at any time you choose, instead of all at once.

You should consider a HELOC if you need money for other items, such as credit card payments or college. There are caps on rate increases. One of the advantages is the financial flexibility; you can borrow during the “draw period,” which is usually 5-15 years. The repayment period is typically about 10-20 years.

All HELOCs are variable/adjustable rate loans. Other benefits include:

Low closing costs
Low interest rates
Interest that only builds on what has been drawn from the line of credit
No restrictions on the use of funds
No usage fees

If you are looking to access equity, consider cashing out instead of refinancing. Contact a Blue Water loan expert for more information.

Is Refinancing Right for You?

There’s a lot to consider when it comes to refinancing. Most importantly, you should understand that it may not be an ideal option for everyone.

Blue Water Mortgage has helped countless homeowners refinance their mortgages and achieve long-term financial benefits. Contact us via the form on this page and we will help you determine if it’s the right step for you. Our loan officers will assess your information, crunch your numbers and get back to you shortly!