Which refinancing option is best for you?
Redwood Capital Bank will work with you to help you qualify for the best loan program to fit your needs; however, there are some general considerations to keep in mind.
Are you refinancing primarily to lower your interest rate and monthly payments? If so, your best option may be a low, fixed-rate loan. If you currently have a fixed-rate mortgage with a higher interest rate, or if you have an adjustable rate mortgage (ARM) where the interest rate varies, you may qualify for a fixed-rate mortgage so that you can lock in a low interest rate for the life of your loan. This is a good idea if you do not think you will be moving within the next five years. On the other hand, if you plan on moving within the next few years, an ARM with a low initial interest rate may be the best way to lower your monthly payment.
Are you refinancing primarily to cash out some home equity? If you would like to pay for home improvements, pay your child's college tuition bill, take your dream vacation, etc., you may qualify for a loan for more than the balance remaining on your current mortgage. If you have had your current mortgage for a number of years and/or have a mortgage with a higher interest rate, you may be able to do this without increasing your monthly payment.
Would you like to cash out some equity to consolidate other debt such as credit cards, home equity loans, car loans or student loans? This may be a good idea! If you have enough equity in your home, paying off other debt with higher interest rates than the interest rate on your current mortgage means you could possibly save hundreds of dollars per month.
Would you like to build up home equity more quickly and pay off your mortgage sooner? Consider refinancing with a shorter-term loan, such as a 15-year mortgage. Your payments will be higher than with a longer-term loan, but in exchange, you will pay substantially less interest and will build up equity more quickly. If you have had your current 30-year mortgage for a number of years and the loan balance is relatively low, you may be able to do this without increasing your monthly payment. For example, if you previously took out a $150,000 30-year mortgage at 8%, with your monthly payment being approximately $1,100 (exclusive of taxes, insurance and so on) and your balance today is down to $130,000, you may want to consider a 15-year mortgage at 6% and have an almost identical monthly payment. This is a great option for people whose main goal is not to save money on their monthly payment but rather want to build up equity and pay off their home in less time. It may also be beneficial for you to speak with your tax consultant.