The Importance of Refinancing

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Your home is one of the most important things you’ll spend money on. It’s also one of the most expensive. Your home should be a place where you can relax and enjoy the best part of your life, not something that causes you stress and anxiety. That’s why refinancing and renovation loans are such an important part of your journey as a homeowner. Keep reading to learn more about the importance of refinancing your house.

Refinancing in the Memphis Housing Market 

It’s a great time to refinance in the Memphis housing market. Even though rates will always go up and down, interest rates are currently staying consistently lower than they’ve been in over a year. If your current rates are a burden on your finances each month, you may want to investigate your refinancing options. 

Just like any big decision, you need to weigh the pros and cons of refinancing. It won’t be the right choice in every situation. The experienced lenders at The Karlton Govan Lending Team can help you find the best option for you so you can love living in your home for years to come. 

Reasons to refinance 

Here are some reasons why refinancing might be the best option for you:

To lower your monthly payment.
If your mortgage rate is much higher than the rate you would currently qualify for, either because rates have changed or your credit is improved, you may be able to significantly lower your monthly payment.

To use your home equity to better manage debt.
If your home has increased in value, you can refinance and use the increased equity to consolidate your debt with a lower interest rate and some extra time to pay it off. 

To pay off your loan faster.
If you’ve had at 30-year mortgage for several years, you may be able to refinance to a shorter mortgage with a lower interest rate. You’ll be able to pay off your loan faster and potentially save a lot of money in the long run. 

To get a low rate for the life of your loan.
If the current rates are significantly lower than the current rate of your loan may be a good enough reason to refinance your loan. 

To get rid of Private Mortgage Insurance (PMI).
If you paid less than 20% of your home’s value and have PMI on your loan, you may be able to get rid of it when you refinance. If you are in a better place financially or can present a higher percentage due to a lower balance, this would be a significant benefit. 

To avoid rate increases from an adjustable-rate mortgage.
If you got an ARM with the intent of saving some money on the front end because you don’t intend to live in the house very long, but end up staying there for the long term, it might be worth refinancing to a fixed-rate mortgage to save money with a lower long term rate. 

For many people who have lived in their house for several years, refinancing can be a great option for saving money in the long run. It can help make your house both a home and an investment. 

Refinancing Cautions 

Refinancing may not be the best choice for everyone. Sometimes it may be better to stay with the loan you have for the time being. The Karlton Govan Lending Team can help you determine if refinancing is the best option for you. 

If you’ll be moving in the next few years. 

When you refinance a loan, you have to pay fees and closing costs all over again. If you’re going to live in the house in Memphis for a long time, the monthly saving will cause you to break even within a few years, and you’ll be saving money every month from there on out. If you are only planning on living in the house for another year, you most likely won’t recoup your closing costs, meaning you won’t see any real savings from refinancing. 

More interest costs in the long run. 

If you refinance to a lower interest rate just to save on your monthly payment, you could end up paying more in interest in the long run. If you’re early in your loan, you probably won’t see the benefit you want. Make sure that when you’re considering refinancing that you calculate every angle. Consider how much of your payment will be principal and how much will be interest, and calculate if paying interest for a longer amount of time will outweigh the monthly savings. 

If you’ll lose valuable benefits from your current loan.

If there are any special benefits to your current loan, you will lose them if you refinance, so make sure the savings from refinancing are worth losing the benefits. For example, the benefit of stability from a fixed-rate loan may save you more in the long run than an ARM that has the potential to skyrocket in the future as rates fluctuate. 

Refinancing your home in memphis

Restoration and Renovation 

The Memphis housing market is perfect for homeowners and investors who want to put a little love into their home with restorations and renovations. The Karlton Govan Lending Team offers a variety of loan options that are designed specifically with home improvement projects in mind. This is a great time of year to consider home renovations that will make your home the perfect place for friends and family to gather for the holidays. 

FHA 203K Limited

There are two kinds of FHA 203K loans, which are loans designed to be used for renovations. The first of these, and the simpler one, is the FHA 203K Limited. This loan can be used for smaller projects, up to $35,000. It covers minor necessary improvements, but no luxury or structural improvements. Additionally, Repairs must start within 30 days of your loan closing, and must be finished within six months.

Eligible improvements include: 

  1. Full kitchen or bathroom remodel
  2. Garage (attached/detached/new)
  3. Structural alterations and additions
  4. Major Landscaping/decks/fencing
  5. Permanent improvements to the house
  6. Install appliances
  7. Repair swimming pool
  8. Install flooring/tile
  9. Interior and exterior painting
  10. Improvements that are a permanent part of the real estate

FHA 203K Standard 

The second type of renovation loan is the FHA 203K Standard. This loan allows you to do larger projects that may include structural improvements. Minimum loan amount of $5,000. The maximum loan amount is based on the home’s after-improved value. Since with loan is significantly larger than the limited 203K, there is more paperwork involved, and there will be more oversight from the lender. 

Eligible projects include: 

  1. Full kitchen or bathroom remodel
  2. Garage (attached/detached/new)
  3. Structural alterations and additions
  4. Major Landscaping/decks/fencing
  5. Permanent improvements to the house
  6. Install appliances
  7. Repair swimming pool
  8. Install flooring/tile
  9. Interior and exterior painting
  10. Improvements that are a permanent part of the real estate 

Fannie Mae HomeStyle Loan for Memphis Investors 

Memphis is a fantastic market for investors and The Karlton Govan Lending Team wants to help you get the largest return for your dollar. The HomeStyle Renovation allows you to finance improvements for up to 75% of the property’s as-completed value when you buy or refinance a home (That’s the appraised value of the home once the upgrades are completed). 

HomeStyle Renovation can be used for any renovation project including updates to an older home, extensive design improvements, and even to construction or renovations to additional living spaces like in-laws suites and basement apartments. You’ll benefit from upfront draws that can help get your projects started sooner. As an owner or an investor, this loan allows you to grow your equity on your purchased home quickly for a faster return on investment. 

Memphis Refinancing Experts 

Whether you’re considering refinancing to save money, shorten your loan, or to finance a renovation, The Karlton Govan Lending Team can help you navigate the many options available to you. We’ll help you find the option that fits your budget and lifestyle, to help keep your house a home for years to come. 

Contact us today to learn more out which refinancing option is right for you. 

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