What is a Rate and Term Refinance?
It’s not every day that the average person thinks about mortgages. In fact, most American homeowners will make a mortgage transaction fewer than 7 times in their lives.
When you get a “Rate and Term” refinance, you are adjusting the variables of your mortgage to better fit your financial needs. A few reasons to refinance your mortgage are to lower the interest rate and save on the total interest you will pay, adjust the term of the loan to pay it off quicker, or lower the amount of your monthly payments.
Read more information below on the variables that can make a rate and term refinance a good financial decision for you.
The interest rate on your mortgage is primarily based on the daily rates set by the Federal Reserve. Over time, mortgage interest rates available in the market will change. As rates dip down lower, save money in the total amount of interest you will pay over the life of the loan by refinancing to a lower interest rate.
The mortgage interest rate that is available to you is also impacted by your credit score, income, and the loan program you select. The with a 740 FICO credit score or higher, you will have access to the best available mortgage interest rates.
If you had a lower credit score at the time you purchased your home, you may be able to improve your credit score and refinance to a lower interest rate in the future.
A Mortgage Term
The term of your mortgage is the length of time your loan is scheduled to be repaid. The most common mortgage term is 30 years. However, there are some cost savings and other benefits to refinancing the a 20 or 15 year term.
If you refinance your 30 year mortgage to a 15 year term, you will save money on the interest you would have paid over the 30 year term. Also, mortgages with shorter terms can have lower interest rate options.
Another great reason to refinance you mortgage could be to lower your monthly payments. If you refinance to a lower rate and don’t adjust the term of your loan, you will likely lower your monthly mortgage payment. Lowering your mortgage payment can help give you extra room in your monthly budget, and you can still put extra money towards the principal balance to pay the loan off earlier if you would like to.
Talk to an Expert
Our team understands the fluctuations in the market, as well as the current mortgage guidelines and regulations. We are here to help you access a better mortgage for your current financial needs.
If you have been thinking about a rate and term refinance for your mortgage, let us know what your goals are. One of our licensed mortgage consultants will show you the mortgage options available to you.
The great new is that TexasLending.com offer some of the most competitive rates on refinancing your mortgage. Reach out to us when you are ready to refinance.