When a person is looking at purchasing/refinancing a home, they often take out a mortgage loan to pay for this transaction. A mortgage loan term typically ranges from 10 years to 30 years. A traditional mortgage loan has principal and interest payments for the life of the loan. In addition to the principal and interest portion of the payment, an escrow account is normally set up to pay for property taxes and homeowner’s insurance.
There are many different types of mortgage loans from adjustable rate mortgages (ARMs) to balloon loans to fixed rate mortgages. The most popular tends to be a fixed rate mortgage where a borrower has fixed principal and interest payments throughout the life of the loan.
Some of the reasons to refinance are:
Many times, yes it does make sense to refinance when rates are low. There are often many factors to consider. In addition to identifying your goal for refinancing, your West Banker can help you determine when savings outweigh the cost of the new loan.
Generally, the rule of thumb for refinancing is to lower your interest rate by 0.5%-1.0% with your new loan. It sometimes makes sense to refinance even with a smaller interest rate savings. This will depend on the overall goals you have with your refinance. Your West Banker can help you determine what is reasonable and where you can have the most savings.
An important question a banker will ask when you are considering a refinance is how long you expect to be in the home. If you plan to move in the next few years, your banker will then look into the interest savings over that period of time versus the cost of the refinance.
Your mortgage lender will need to know:
Your credit score is also an important factor. If you want to improve your credit score, there are steps that you can take to do so. See our blog post on credit scores.
After you have discussed your options with a reputable, experienced banker and had your initial questions answered, it's time to apply for your loan. Your West Banker can provide a loan application and will walk you through the process from start to finish. Your banker will help you complete the mortgage application, gather the necessary documentation and then walk you through signing closing paperwork. Normally this process is pretty simple and is usually done in about 60 days.
If you refinanced your mortgage loan and rates continued to go down, there may be a point where you are considering refinancing again. You might have a short waiting period of a few months from your most recent closing, but there is no limit on the number of times you can refinance a mortgage loan. Again, discussing your options with a West Banker is the best way to decide if it is the right time to refinance.
As you can see, there are a lot of things to consider when thinking about refinancing your mortgage loan. When you approach big financial decisions in your life, it's important to work with a banker you can trust. Your community banker who already knows you and understands your financial situation will be better equipped to guide you and look out for your best interest. Many times an event like buying or refinancing a home is the foundation of a strong and enduring relationship that will see you through your financial journey. Whether you already have established such a relationship with a West Banker or have been referred to West Bank by a trusted friend or associate, we are here to help!
Sara J. Larson, NMLS ID #586802, was hired as Vice President/Branch Manager for the 1601 22nd Street, West Des Moines Branch in July, 2019 with over 22 years of experience in the financial services industry. She has experience in retail, management, audit/compliance, mortgage, lending and was also a state bank examiner. Originally from New Sharon, Iowa, she graduated from the University of Northern Iowa with a bachelor's degree in Finance and a minor in Psychology.
Active in the community, Sara serves on the boards of directors of the Waukee Public Library Friends Foundation and Greater Des Moines Partnership Business Resources & Community Development Board. She belongs to the Waukee Chamber of Commerce and is a Chamber Ambassador.
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