Mortgage Refinance Boom Continues as Homeowners Seek Financial flexibility
Table of Contents
As interest rates fluctuate and personal circumstances evolve, a surge in mortgage refinance applications is underway, driven by homeowners aiming to optimize their finances. Whether it’s shedding PMI, removing a co-borrower after a life change, or adjusting loan terms for long-term stability, knowing what to say to a mortgage lender is crucial for a smooth and successful refinance.
Here’s a guide to phrasing your needs when speaking with a lender, covering common refinance scenarios:
Lowering Your Interest Rate
The most frequent reason to refinance is to secure a lower interest rate. Be direct: “I’m looking to refinance my mortgage to take advantage of current interest rates and potentially lower my monthly payment.” You can also add, “I’d like to explore options for reducing my interest rate while keeping my loan term the same.”
Eliminating PMI
If you’ve built up enough equity in your home, you may be able to eliminate Private Mortgage insurance (PMI). State your goal clearly: “I want to refinance to remove PMI from my mortgage.” Lenders will assess your current loan-to-value ratio to determine eligibility. You might also say, “I’m hoping to refinance and get rid of PMI at the same time.”
Removing a Co-Borrower
Life changes like divorce or separation often necessitate removing a co-borrower from a mortgage. Communicate this need upfront: “I want to refinance to get my ex’s name off the mortgage.” This process involves refinancing the existing loan in one borrower’s name.
Moving from Adjustable-Rate to Fixed-Rate or Vice Versa
Adjustable-rate mortgages (ARMs) offer initial low rates, but can fluctuate. Homeowners often refinance for predictability. If seeking stability,say: “I want to refinance out of my ARM into a fixed-rate mortgage.” Conversely, if planning a short-term homeownership, you might state: “I want to refinance into an ARM because I plan to sell the house in four years.”
Changing the Loan‘s Term
Adjusting the length of your mortgage – from 30 years to 15, such as - can impact monthly payments and total interest paid. Initiate the conversation with: “I’m thinking of reducing my loan term. Can you step me through the pros and cons?” Refinancing to a 15-year loan typically results in a lower interest rate but higher monthly payments. A lender can definitely help you weigh the benefits of shortening the term versus making extra payments each month.
