At some point in your journey as a homeowner, you may consider refinancing your mortgage. But what exactly does it mean, and what does it do? Simply stated: refinancing replaces your existing loan with a new one, allowing you to change the mortgage maturity date or interest rate or potentially take cash out of your home’s equity.
The benefits of refinancing with Rural 1st® could include:
- Lowering your monthly payments by extending the maturity date of your loan.
- Shortening the maturity of your loan to save money in interest and pay off your loan sooner.
- Lowering the interest rate on the loan, which could reduce the amount you owe each month and save dollars in interest over time.
- If some or all of your income comes from farming, a cash-out refinance may be another option available to you. This kind of refinance allows you to tap into the equity you’ve built in your home to get cash in hand or pay off other debt. Your Rural 1st Loan Officer can help you determine if you qualify.
- Refinancing a current property and purchasing additional adjoining acreage. There is a 5-acre minimum on the additional acreage, and the property you are refinancing must be a second home.
We offer two main types of refinances: rate and term refinance and cash-out refinance.
Rate and Term Refinance
Rate and term refinancing will either change your interest rate or how long you have to repay your loan. Increasing your loan’s term (how long you have to pay it off) can lower your monthly payments. Or you could opt to save money on interest over time by taking on a higher monthly payment and paying your loan off faster. You may also find that you qualify for a lower interest rate.
Cash-out Refinance
A cash-out refinance occurs when you take out the equity you have in your home to pay off other debt, make home improvements, boost retirement savings or start a college fund for a child. Equity is the amount your property is currently worth, minus the amount of any existing mortgage on your property. Your interest rate and term may or may not change, but your mortgage principal balance will increase if you choose to move forward with a cash-out refinance, and your monthly payments may increase.
The first step in the refinance process is to contact your Rural 1st loan officer. Because refinancing is a lot like applying for a mortgage, you must qualify first. Your Rural 1st loan officer will review your current home equity, credit score and other debts when considering you for a refinance. He or she will also ask you to provide documents such as pay stubs and tax returns.
If your refinance is approved, you’ll receive a loan estimate outlining your new terms and interest rate. This will include any associated fees. Rural 1st will underwrite your loan and order an appraisal. If your loan is approved and meets the required eligibility requirements, your closing is scheduled. If you are opting for a cash-out refinance, you’ll get your money approximately three business days later.
If you’re planning on or have questions about refinancing, reach out today.