Refinance FAQ

The reasons to refinance depend on your personal circumstances. If you have an adjustable rate mortgage (ARM) that is about to adjust, it may be a good time to refinance to a loan program with a lower rate. Other homeowners use refinancing to meet specific cash needs such as college for kids, an upcoming wedding, etc. Additionally, if your home has appreciated since your initial purchase, you may look at refinancing as a way to drop PMI or a 2nd mortgage. Even a higher rate can still reduce your payment.

Can you do a HELOC?

Yes; we can offer a HELOC. A HELOC is a line of credit that a lender provides you based on the equity in your home. HELOCs are convenient for funding intermittent needs, such as paying off credit cards, making home improvements, or paying college tuition. You draw and pay interest on only what you need.

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Should I switch from an adjustable to a fixed rate?

It depends. The type of mortgage you hold and the interest that you choose to pay really depends on your personal circumstances including how far into the term of the loan you are as well as how much longer you plan to live in the home. If your adjustable rate is lower than a fixed rate and will stay that way until you plan to move, it may be wiser to keep an adjustable rate. However, if you have an adjustable rate that is getting ready to adjust to a higher rate, it may be wise to look at refinancing to a fixed rate.

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Can I get cash from my home equity when I refinance?

Yes; this is called a cash-out refinance. Depending upon your personal circumstances, some loan programs will allow you to get cash up to 100% of the equity in your home.

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Is the cash-out option different than a home equity loan?

Yes; receiving cash back from a refinance will essentially increase the amount of principal owed on your home. However, a home equity loan keeps your original mortgage untouched and simply provides a second mortgage on your home.

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Is the rate higher for a cash-out refinance?

Yes; you will typically pay a higher refinance rate for this option.

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How long does it take to refinance?

As with most loan programs, the processing time for a mortgage or refinance is typically 30 days.

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Do I have to wait a certain amount of time after I purchased my home to refinance?

The amount of time that you have to wait can vary but most lenders typically require that you wait at least 12 months since the date of your home purchase. If you don’t opt to take any cash out, some lenders will allow you to refinance immediately after acquiring your home.

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I have heard that the interest rates should be 2% lower than my current rate to justify refinancing.

There are many motives for refinancing an existing loan. Cash out for improvements, shorter terms to pay the loan off faster, fixed rates to protect against future variable changes and others. One reason to refinance is to lower the rate or interest costs. The amount that the rate should decrease is a product of the costs of the refinance transaction and the length of time that the mortgage will likely continue. Since there are loans where the lender pays all closing costs, the justification for refinance must be discussed with a qualified mortgage consultant to determine whether it makes sense. The 2% rule is certainly a myth, but at times might be a real possibility.

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How is Alera Financial different?

Alera Financial is a licensed mortgage lender that believes in making your mortgage transaction as easy and painless as possible. Find out how we’re different with the Alera Financial Difference.

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