How to Refinance Your Mortgage

For many seniors, owning a home represents a significant portion of their wealth. However, sometimes the equity they have within that home is better served as a steady stream of income. This is where reverse mortgages come into play. Tailored to homeowners aged 60 or older, reverse mortgages allow eligible parties to convert a portion of their home equity into cash. In this blog, we'll explore the ins and outs of reverse mortgages, covering everything from how they work to the different types available and the reasons one might consider this option. Reverse Mortgages and How They Work A reverse mortgage is a financial product designed for homeowners aged 62 or older, enabling them to convert a portion of their home equity into tax-free funds. To qualify, homeowners must own their property outright or have a substantial amount of equity. The process involves a lender making regular payments to the homeowner, with the loan typically repaid when the homeowner sells the home, moves, or passes away. Different Types of Reverse Mortgages When it comes to reverse mortgages, there isn't a one-size-fits-all solution. In fact, when you work directly with your Loan Originator, they can tailor your reverse mortgage to fit your own individual wants and needs. Below are just a few of the different ways that you can receive the funds from your reverse mortgage: Lump Sum: If you'd prefer to receive the funds of your reverse mortgage up-front, you can choose a lump sum payment from your lender. This option is the only one that comes with a fixed interest rate. Equal Monthly Payments: You can choose to receive equal monthly payments as long as you use the home as your primary residence. Line of Credit: With a line of credit, you can receive a set amount of money upfront. This is popular if the borrower needs to pay for any home renovations or any other expense with a large lump payment. Term Payments: With this option, you can receive equal monthly payments for a term of your choosing. This would apply if you plan to live in the home for another 10 years and want to use your equity as a steady stream of income as long as you live there. If you're curious about which option is best for you, consult with your UMortgage Loan Originator for their expert financial advice! Is a Reverse Mortgage Right for You? Getting a reverse mortgage isn't a decision to take lightly. There are plenty of factors that go into the decision and a number of variables to consider before you put pen to paper. A reverse mortgage might be a good option for you if you don’t want the responsibility of making a monthly loan payment, can't afford to continue to make a monthly loan payment, or are unable to qualify for a cash-out refinance. As always, your UMortgage Loan Originator is a great resource who can find a reverse mortgage solution that is perfectly tailored to your unique financial situation. If you're interested in learning more, reach out to start the conversation!

As a homeowner, you’ve almost certainly heard of a refinance. What you might not know is that there’s a lot more to a refinance than simply just getting a new mortgage rate. In this blog, we’ll break down the basics of refinancing your mortgage, how they work, the different types of refinance, and the type of refinance that might work best for you. What is a Refinance and How Does One Work? A home refinance replaces your current mortgage with a completely new home loan. When you refinance, your new lender typically uses your new, refinanced mortgage to pay off your existing mortgage. This way, you’re left with one monthly payment that has a new interest rate and principal (or the total balance owed on the loan). If the following steps sound familiar, that’s because they are! The process for refinancing your home is a lot like your original mortgage process when you first bought your home ­— this time without the added stress of shopping for your home and competing offers on the home you’re itching to buy. Application & Locking Your Rate When you decide to refinance, you’ll need to submit an application with your income, credit score, and any current debts to ensure that you meet the eligibility requirements to refinance. Once you’re approved, you’ll be quoted with a new interest rate. Just like when you bought your home, you can lock your rate for up to 60 days to ensure you still have access to your quoted rate if mortgage rates rise. You can also have the option to float your rate; this means that you can potentially access a lower rate if they drop over time, but it also puts you at risk of getting a higher rate if they increase before you close. Underwriting & Closing Upon submission of your application and subsequent approval, your new loan will go through underwriting. During underwriting, your lender will cross-reference the financial documents and information you submitted for accuracy. They’ll also require a refinance appraisal to determine the value of the property you’re refinancing. This appraisal is key to a cash-out refinance, which we’ll cover in more detail below. Assuming you pass underwriting, it’s time to close your loan! Your lender or Loan Originator will send your Closing Disclosure (CD) which outlines all the final figures – including your new interest rate, closing costs, loan amount, and more. When it comes time to close, you’ll review the details of the loan, sign your loan documents, and pay any necessary closing costs. If you’re doing a cash-out refinance, this is when you’ll receive the money owed to you by the lender; but again, we’ll outline cash-out refinances in greater detail a little later. Different Types of Refinance So, now that you know how a refinance works, let’s cover the different types of refinances that are commonly used by homeowners. Below, we'll go more in-depth on rate & term refinances and cash-out refinances and expand on the ways that these two options work. Rate & Term Refinance The most popular type of refinance — and what you probably first think of when you think about a refinance — is a rate & term refinance. True to the name, this kind of refi simply updates the interest rate and the term (or the repayment length of your loan). Homeowners choose to get a rate & term refi when they want to lower their monthly mortgage payment. This makes the most sense for you if interest rates are significantly lower now than they were when you initially bought your home. Another option with a rate & term refinance is to shorten the term of your loan. This typically leads to a higher monthly payment but can significantly lower the total amount of interest paid on your loan. Cash Out Refinance If you’re looking to tap into the equity you’ve earned in your home to help pay for a home project or consolidate another debt, you might consider a cash-out refinance. When you get a cash-out refinance, you essentially replace your existing mortgage with a new loan that’s larger than your current loan balance. The difference between your existing mortgage balance and your new mortgage is the amount of cash you receive. It's crucial for homeowners to understand that the larger loan amount means higher monthly payments and increased overall interest costs over the life of the loan. Therefore, careful consideration and thorough financial planning are essential before opting for a cash-out refinance to ensure it aligns with their long-term financial goals. How to Know if a Refinance is Right for You Now that you know the basics of refinances, how do you know if a refinance is right for you? Consider the points below. If one of these situations resonates with you, then a refinance might be on the cards for you! Reduce Your Monthly Mortgage Payment The most common reason homeowners refinance their homes is to reduce their monthly mortgage payments with a lower interest rate. Before you refinance to lower your monthly payments, consider your break-even point after considering closing costs. If you think you’ll only live in and/or own this property for another couple of years, it might cost more to refinance than it would to keep your existing mortgage. Utilize Your Home Equity Your home is an investment that gives back as much or more than what you put into it. If you want to complete a kitchen remodel, pay off existing debt, or generally get some funds for a one-time expense, you can use a cash-out refinance to tap into the equity you’ve been building since buying your home. Change the Length of Your Loan If you are comfortable paying a higher monthly mortgage payment to reduce the amount of interest you pay over the life of your loan, you can get a rate & term refinance to shorten the term of your loan. If you shorten your loan from a 30-year to a 15-year, you’ll pay more upfront but less over time since you’re accruing less interest. Change Your Loan Type If you have an adjustable-rate mortgage and want to switch to a fixed-rate mortgage to have a more stable monthly payment, a rate & term refinance is a great option for you. The same can apply if you have an FHA loan and want to switch to a conventional, a conventional loan and you want to utilize your VA benefits, or generally see another loan program that might work best for your individual situation. It’s a great idea to consult with your UMortgage Loan Originator to get an expert’s opinion when changing your loan type. Eliminate Mortgage Insurance If you financed your home with an FHA loan or your down payment was less than 20%, you were required to lump Private Mortgage Insurance (PMI) into your monthly mortgage payment. Often, mortgage insurance can account for up to $200 of your monthly payment — those dollars really stack up over time! By refinancing to a conventional loan from an FHA loan or refinancing after having reached 20% equity in your home, you can refinance to eliminate your PMI payments from your mortgage. - There are plenty of great reasons to refinance your mortgage and a plethora of different types of refinances that can fit your unique financial situation. Your situation is unique, so if you’re still wondering what type of refinance might be best for you, reach out to your UMortgage Loan Originator for a personal consultation.

There are countless intricacies to the homebuying process, and although answers online are plentiful, it can be tough to know what information is trustworthy. I’ve helped plenty of first-time buyers through their homebuying process, and in the blog below, I’ll share some answers to the most frequently asked questions I’ve received. How Much Money Do You Need to Buy a Home? So you want to buy a home, but you don’t know how much money you need to bring to the table when you’re starting this process. There’s plenty of information online that states that you need as much as 20% down, but maybe you have a friend who purchased their home with little to no down payment. The question is: how much do you actually need? The answer isn’t quite as straightforward as you might like it to be, but the truth is that it depends on a variety of factors. This includes location, the type of property you want to buy (house, townhome, condo, etc.), and your own individual financial situation. In general, you should expect to need at least a 0-5% down payment, as well as closing costs which can average from 2-5% of the sales price. Additionally, try to have enough savings to cover 3-6 months of mortgage payments in case of an emergency. You never know what could happen and it’s always a good idea to be extra prepared in case you find yourself in a pickle. How Much Money Should You Make if You Want to Buy a House? Newsflash: buying a house Is expensive. Having a steady stream of revenue should be a cornerstone for every homebuyer. But how much should you be earning if you want to buy a home? There are four factors that will determine what you can afford based on your financial picture: The projected payment Current debts Qualifying income The loan program’s debt-to-income (DTI) ratios The DTI varies depending on the loan program that you decide to go with. On average, it’s about 45%. To determine how much you need to earn to qualify for a home’s mortgage, you take the estimated payment and add your current monthly debts. This includes credit card payments, car payments, personal loans, other mortgages, child support, etc. Divide this sum by 0.45, and that gives you the minimum amount needed to qualify. How Long Does the Homebuying Process Take? Buying a home can take anywhere from a few weeks to several months, depending on how complex the process is. Regardless, it’s best to be as prepared as possible for this life-changing purchase, so the sooner you start, the better. In general, you’ll want to meet with a mortgage lender, like myself, anywhere between 2-6 months before you want to buy. This gives us plenty of time to come up with a plan and make sure you’re ready to shop. After you’re pre-approved, you’ll likely work with a real estate agent to find the home you want to buy. Once you’ve made an offer, so long as it’s accepted, it usually takes anywhere from 30-45 days until you can close on that home. There are plenty of factors that can affect the timeline, such as how quickly your loan can be approved, how quickly the seller responds to your offer, and how quickly the inspection and appraisal can be completed. At the end of the day, the homebuying process can seem complicated to the untrained eye. That’s why it's important to work with an experienced lender and Realtor who can help you navigate the process and make sure everything is done efficiently. If you want to get started with your homebuying journey, or if you have any additional questions regarding the process, let’s connect!