Refinance Your Home
Refi for Real Savings
Several Ways to Save Big
Refinancing can help you reduce your monthly payment, lock in a lower fixed rate, or pay your home off sooner. You can also use a refinance to take advantage of some of the equity you’ve built up or to pay off other debt.
Types of Refinance Mortgages
Fifteen-year refinance loans typically offer a lower interest rate but have a higher monthly payment than a 30-year fixed-rate mortgage due to the shorter repayment term.
Fifteen-year refinance mortgages are a great option for homeowners who have already paid off a lot of their existing mortgage or have a large portion of established equity. A lot of borrowers also choose this option when they want to get a lower interest rate without starting a brand-new 30-year mortgage or for those wanting more equity, this option will help build home equity faster.
Thirty-year refinance loans have a fixed interest rate. They are a good option for homeowners who have not owned their home for a long time and want to take advantage of lower interest rates, if applicable, or lower monthly payments.
The total expense of a 30-year fixed interest loan is higher than a 15-year fixed interest loan, but the monthly payments are lower thanks to the longer repayment period.
An Adjustable-Rate Mortgage (ARM) has an interest rate that can change during the term of the loan with changes in the interest rate market. Your rate and payment are fixed for an initial period after which they can change over the remainder of the loan.
For example, a 3/6 ARM loan has a fixed interest rate for the first 3 years. After those 3 years, the interest rate could go up or down every 6 months based on market conditions. Adjustable-rate mortgages usually start with lower rates than fixed-rate loans. However, they carry the risk of increasing over time, which could lead to higher monthly payments in the future.
At Seattle Credit Union, we offer 3/6, 7/6, and 10/6 ARMs. You can meet with a Mortgage Loan Officer who can help break down how the expected payments could fluctuate throughout the life of this type of loan.
A home equity refinance loan allows you to borrow against the equity in your home (equity is the difference between the value of your home and how much money you owe on your mortgage).
A home equity loan can help provide cash for debt consolidation or bill payments, or large projects like home renovations. You usually have an equity loan in addition to your first mortgage, but not always.
A cash-in refinance loan involves paying additional money toward your principal as part of the refinance. Why would you want to put additional money toward your principal balance? There are a few reasons.
If the value of your home has dropped so that your mortgage is more than 80% of your home’s value, you may be facing the addition of private mortgage insurance (PMI) premiums to your loan, which raises your total monthly payment. Putting additional money toward your principal can restore your 20% equity in the home.
If you want to refinance for a lower interest rate, but you owe more on the mortgage than your home is worth, then cash-in refinancing is your best bet. If you have experienced a large windfall (or have 10K in a savings account) it can make sense to refinance your mortgage at a lower rate, while paying off a portion of the principal. This can significantly lower your monthly mortgage payments. A cash-in mortgage can help you qualify for a 15-year refinance loan, should you wish to retire your loan sooner.
A cash-out refinancing loan involves taking a loan for an amount greater than what you owe on your home currently and receiving the difference in a cash.
Why would you want to take a loan out for more than you owe on your home? You might choose a cash-out refinancing option if you need to pay for education, medical costs, or home improvements. This allows you to use the equity built in your home to provide cash.
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Mortgage FAQs
A mortgage is a loan secured by your home. Mortgages can be used to purchase homes and property, to refinance an existing home loan, and in some cases to provide cash or pay off other debt.
An ARM is a mortgage loan that has an interest rate that can change periodically during the life of the loan. Most ARMs are subject to change only once per year. Some can have a fixed interest rate for a specified number of years at the beginning of the loan and then change annually after that. For example, a 3/1 ARM has a fixed rate for the first three years of the loan and then can change once a year after that.
Your loan documentation will specify how often your rate can change as well as the minimum and the maximum amount it can change each period and how much it can change over the life of the loan.
When the rate on an ARM changes, the payment will change. That’s why your Seattle Credit Union mortgage expert will be sure that you can afford your loan at the initial rate as well as at the maximum rate. The last thing you want is to have your payment increase beyond what you can afford to pay. Seattle Credit Union is dedicated to making sure that our members don’t find themselves in this situation.
With a fixed rate loan, your rate does not change for the life of the loan, regardless of the market.
Seattle Credit Union strives to have all approved mortgage loans funded within 30 days of approval. However, between approval and funding there are a number of things that need to happen, including:
- Verification of income and other application data
- Appraisal of the property and dwelling
- Review of the title records associated with the property
- Creation of the loan documents
Down payment requirements will vary based on the mortgage program you are interested in and your individual financial situation. Talk to your Seattle Credit Union mortgage expert for information specific to you and your loan.
Your mortgage expert will be able to tell you specific documents you will need, but these documents are commonly requested:
- Tax returns or other proof of income, including documentation of any supplemental income you receive from sources other than your primary employment, such as rental or investment income.
- Recent bank and/or brokerage statements. This may also include paperwork for your retirement assets.
- A list of your recent addresses, usually two years’ worth.
- The purchase or sales agreement if you have already made an offer on a home or condo.
The approval process is dependent on the number of applications received, but usually only takes a couple of days, once we receive a completed application.
Points are fees you pay to a lender when you fund your mortgage in exchange for a lower interest rate. Seattle Credit Union offers programs with points and without points. Talk to your mortgage expert to determine whether paying points makes sense for you.
In many cases, the lender who holds your mortgage loan will be responsible for making sure that your property taxes and property insurance premiums are paid in a timely fashion. To do that, your lender will collect a certain amount above your designated monthly principal and interest payments and hold it in an account, called an escrow account or an impound account. Sometimes you will see this amount listed with your regular payment as “T&I” and when your tax or insurance payments come due, the lender will pay them from this escrow account.
Because taxes and insurance can change from year to year, the amount you pay each month can change as well. Each year your lender will provide you with a statement showing how much they’ve paid for taxes and insurance on your behalf and what they expect to pay in the current year.
You may be eligible to pay these items yourself, which would remove any escrow payment from your monthly payment.
Whether you are looking to refinance your existing mortgage to save money or get cash, the mortgage experts at Seattle Credit Union can help you get the right loan without the headaches of the typical mortgage process.
Question About Home Loans?
Whether you’re buying your first home or refinancing the one you love, we’re here to help you put down roots. Share your info below and we’ll be in touch to answer any questions you may have. Please do not include any sensitive information, such as member numbers, account information, or Social Security numbers.