Home Refinance

What is a home refinance?

Refinancing a home means one is paying off their existing mortgage, and replacing it with a new mortgage, preferably with State Bank of Southern Utah. The new mortgage must benefit the borrower in some way to be eligible for a refinance, and since it is a new mortgage the borrower will have to qualify like they would when purchasing a home. 

Benefits of a Home Refinance

As mentioned above, there must be a benefit to the borrower in order to refinance the home. There are typically 4 types of benefits of refinancing.

1. Reducing monthly payments. This is the most popular reason to refinance. If current interest rates are lower than the interest rate on your existing mortgage, or you are willing to extend the term of your loan, a refinance could be used to reduce your monthly payment. This frees up more monthly residual income.
2. Shortening the term of a mortgage. Shortening the term of a mortgage doesn’t often result in a lower monthly payment but it does generally reduce your interest rate and greatly reduce the amount on interest paid through the life of the loan.  This typically will result in a much larger overall savings than reducing your monthly payment.
3. Cash-Out Refinance. A cash-out refinance is when the loan amount on the new mortgage exceeds the payoff of the existing mortgage resulting in cash being given to the borrower.  In order for a property to qualify for a cash-out refinance there must be equity in the property. There are also limits as to how much equity can be used to get cash back.  This money can be used for any purpose.  Home remodels, large purchases, debt consolidation, etc.
4. Transfers of ownership among family. Very often ownership will transfer among family members. Marriage, inheritance, and divorce are all common reasons for ownership to transfer.  When ownership transfers to another person, the mortgage loan doesn’t automatically transfer.  Only with refinancing can a loan be transferred to another person.