The information provided below does not, and is not intended to, constitute legal advice. All information, content, and materials available on this page are for general informational purposes only.
How Refinancing a Mortgage Works
Put most simply, mortgage refinancing is when you take out a new loan to pay off and replace your old loan. You may qualify for a mortgage with a better rate after you’ve made the payments on your mortgage for a few years to establish reliability, build up some equity in your home, or reduce your overall amount of debt. Additionally, outside circumstances such as a drop in interest rates nationwide, can affect the quality of refinancing options.
Keep in mind, refinancing an existing mortgage means going through another mortgage approval process, which typically incurs closing costs and fees.
A refinanced mortgage will naturally come with new terms, making it important for a homeowner to fully understand what the new interest rate and term length is, and how much of the cost reduction is from a lower interest rate and how much is because your loan term is longer.
While the process can seem like a lot to take on, a trusted financial advisor or lender can help a homeowner navigate the process to make sure they are making smart decisions that will ultimately save them money, instead of cost them. After all, there are plenty of advantages to refinancing. If you’d like to learn more, contact one of our loan officers.
Refinancing Your Existing Mortgage to Improve Your Interest Rate
With a loan as large as a mortgage, even small changes in the interest rate can lead to substantial savings in both the short and long term. For example, a 30-year, $200,000 mortgage with a 6% interest rate will mean a monthly payment of $1,199 and a total cost of $431,676 over the term of the loan. Lower that rate of interest by even a single percentage point, however, and you begin to see how important this number is: for that same 30-year, $200,000 mortgage, dropping the interest rate to 5% changes the monthly payments to $1,074 and the total cost to $386,512 – saving you $125 each month and more than $45,000 over the life of the loan. This example highlights how dramatic the savings can be when the interest rate on your mortgage is lowered even slightly.
Affordable Home and Commercial Mortgage Refinancing Available from Customers Bank
In summary, when interest rates are low, it might be a good time to consider refinancing your existing mortgage. Consider these benefits:
- Refinancing can potentially save hundreds of dollars each month, and that can translate to thousands of dollars over the lifespan of the loan.
- If the homeowner has owned their house for five or more years, refinancing may help remove the requirement for mortgage insurance which also increases savings.
- Refinancing higher rate mortgages can include lowering interest rates, providing better terms and possibly shortening the length of the mortgage.
Those looking to refinance their existing mortgages or purchase a new home, should consider the options available from Customers Bank. Our lending specialists can offer a variety of loan products and services, from conventional mortgages to government-backed loans. We offer several different mortgage options in the following states: Pennsylvania, New York, New Jersey, Connecticut, Delaware, Massachusetts and Rhode Island. To learn more, visit our website or contact one of our loan officers.
All products and services are subject to approval.