Are you feeling overwhelmed by debt? You’re not alone. In fact, many American households are dealing with credit card debt on top of their mortgages, student loans, car loans, medical bills, and the list goes on.
THE GOOD NEWS
For homeowners, the good news is that you may be able to make the debt you have more manageable by refinancing your mortgage. Why? A refinance can help you consolidate your debt by capitalizing on low mortgage interest rates while tapping into your home’s equity.
HOW CAN A REFINANCE HELP PAY OFF DEBT?
Are you familiar with cash-out refinances? We’ve talked about cash-out refinances in the past, but in case you forgot what it is, a cash-out refinance is a type of mortgage refinance that allows homeowners to consolidate debt. This process allows you to borrow money from the equity you have in your home and use that to pay off other debts like credit cards, student loans, etc. Basically, you are paying off any existing balances by transferring them to your mortgage, placing all balances into one debt. This results in only having to make one mortgage payment.
SHOULD YOU REFINANCE YOUR MORTGAGE TO CONSOLIDATE DEBT?
Reach out to one of our local loan experts to discuss your options. When determining if a cash-out refi is best for you, here are some questions to ask yourself:
1. Do I have enough equity?
You will need to have enough equity to borrow while keeping some remaining in the home. The amount of equity you leave in your home after a refinance is important because it affects your loan-to-value (LTV).
An LTV determines if you need Private Mortgage Insurance (PMI), which can cost hundreds on your monthly mortgage payment. Keep in mind that if your LTV is higher than 80%, you may be required to pay this insurance. To avoid paying for private mortgage insurance, your LTV after you refinance needs to be at 80% or lower. Here’s an example of how you can easily calculate your LTV before you refinance:
Let’s say your home is worth $500,000 and your loan balance is $250,000. Your LTV would be 50%.
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Property Value = $500,000
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Loan balance = $250,000
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250,000/500,000 = 0.50
To figure out how much your LTV would be with a cash-out refinance, simply add the amount of equity you want to borrow to your current loan balance, then divide that by the appraised value of your property. For instance, say you want to borrow 10,000 to pay off your credit card debt, your new loan balance would be $260,000 and your new LTV after your cash-out refinance would be 52%.
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Property Value = $500,000
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Loan Balance = $250,000
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Cash-out amount borrowed = $10,000
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New loan balance - $260,000
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260,000/500,000 = 0.52
With a 52% LTV, you could do a cash-out refinance with enough equity leftover to avoid PMI.
2. Can I afford a higher monthly mortgage payment?
Refinancing does not get rid of debt. However, it transfers it over to another debt also known as your mortgage. When you refinance your mortgage, your balance increases by the amount of equity you borrowed. It’s important to understand that no matter how much debt you transfer, increasing your mortgage balance will in turn increase your monthly mortgage payment.
3. Does the cost of the mortgage make sense compared to other options?
Do you remember paying closing costs on your original mortgage? Well, you will also need to pay these costs on a mortgage refinance. There may be some additional costs included as well – speak with your loan officer for more details.
If you think a mortgage refinance is right for you, reach out to one of our local loan experts. We will review your current mortgage and see what the next best step is. If you’re ready to get the process started, get a free pre-approval today. This process takes less than 5 minutes and you can do it from your phone! Click here. If you prefer to speak with one of our Loan Officers, we would be happy to help! 908-489-4658.
We know this is a big financial decision, and we want to make sure you make the best decision possible.
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The media says mortgage rates are near “historical lows.”
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To put that in perspective, check out the graph. You’ll see that with rates now under 4%, they're less than half of the long-term average of 8%.
The combination of low mortgage rates and rising prices in most areas can create great opportunities. At the least, this is a great time to ask questions and assess potentials.
Your local loan experts at Greenway Mortgage are happy to talk with you about the range of possibilities—refinancing to a lower payment, accessing cash from the equity in your home, or perhaps even moving on to a new home.
When you're ready for an honest discussion about what might be right for you, even if that’s staying with the loan you have, we will be happy to assist. Please reach out!
- For all the details about Automation and Big data click here. - 
Our relationship doesn't end at closing. I want you to be a client for life!
I leverage big data to continuously monitor your loan account. My system automatically conducts a loan review two times per year. It monitors property value, equity position, and interest rate. It will also auto-trigger notifications when you can eliminate PMI (private mortgage insurance) and possibly lower your rate and/or payment.
Thank you for taking a few minutes to learn more about how I leverage automation and big data to make the mortgage process faster and more efficient.
And remember, it all starts with My Mobile Mortgage App. Download it today.
Did you miss Part 1 and Part 2 of this blog series?
- Part 1: How Automation and Big Data Make the Mortgage Process More Efficient
- Part 2: Your Loan in Motion with Big Data Loan Approval System
You can learn more about Automation and Big data by clicking here.
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I was thinking of purchasing a home or property, but I’m worried values will fall.
I worry that my income will shrink or I’ll even lose my job.
If I borrow against the equity in my home, I might end up owing more than my home is worth.
- For all the details about Automation and Big data click here. -
Once you have a signed purchase contract on a home, my big data loan approval system kicks in. My team and I have built a technically advanced loan approval system that uses big data and secure integrations to streamline the loan approval process, eliminate paperwork, and close document requests (aka conditions) to quickly and efficiently approve your loan.
During this process, there are a number of documents that you are required to execute and sign. Instead of visiting our office or emailing, printing, signing, and scanning documents, our client portal has E-sign technology that allows you to execute from anywhere. This speeds up the loan approval process and saves a few trees.
Assuming you've fully and accurately completed the application and provided me with access to your financial and employment information during the pre-application phase, I'll be able to get your loan approved and closing scheduled quickly.
One of the greatest benefits of my big data system is the availability of appraisal waivers. Appraisals are the long pole in getting your loan closed. If my system determines that an appraisal is not required for the property, you can save upwards of $400 and shorten the closing timeframe by five to 10 business days.
CLOSING
Now you’re ready to close. Here’s the good news – we use E-closings!
Previously, you had to sit and hand-sign a huge stack of documents with your settlement agent. In addition to coordinating an in-person meeting and possibly missing time from work, the process of signing paper documents could take hours! Now, you can E-sign your mortgage documents remotely and securely at your convenience. Again, this saves time and paper and reduces the risk of error.
Stayed tuned for next week's blog (part 3) on "Clients for Life".
You can learn more about Automation and Big data by clicking here.
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