Refinancing can be beneficial if everything lines up in your favor. It’s important to take into account your existing mortgage parameters, the current environment for mortgage rates, and your current financial standing.

If those all line up, what are a few benefits of refinancing? Here are just a few;

One of the most powerful outcomes of refinancing a loan is a lower interest rate. Whether your credit score has improved since you originally took out the mortgage loan or simply because average rates have dropped, if a significantly lower rate is possible, it’s worth looking into. A lower interest rate can make a big difference in how much you pay over the life of your loan.

If your current monthly payment is hard to afford, you might be able to lower it through refinancing. Most often, this is done through the combination of a long (or longer) term on a lower total loan amount. For example, if you took out a 30 year mortgage for $100,000 and paid off $20,000, that would leave you with $80,000 left to pay. If you decide to refinance with another 30 year loan, you can now spread the payments for the remaining $80,000 out over 30 years. This makes your monthly payment smaller.

That being said, it’s important to take interest into account. If you were already 10 years into your mortgage and decided to refinance for another 30-year mortgage, you’d now be paying interest for a total of 40 years. That means that while your monthly payments may be smaller, it’s possible that you’ll pay more overall than you would have without refinancing.

You could refinance to shorten the term of your loan. Mortgages especially benefit from shorter terms. For example, the difference in total interest for a 15-year mortgage vs a 30-year mortgage is significant. This is because 30-year mortgages usually have higher interest rates and require you to make payments for twice as long, allowing more interest to rack up. Refinancing to a 15-year option will allow you to pay off the loan quicker and save some cash, but be aware that a shorter mortgage term typically means higher monthly payments.

If refinancing won’t significantly change your interest rate, it may be just as effective to simply make larger monthly payments on your own. But make sure to check if your loan has any prepayment penalties. These fees can be significant and reduce the benefit of paying your loan off early.

A cash-out refinance allows you to borrow enough money to pay off your old loan and a little extra. Unless it’s a limited cash-out refinance, you can then use that extra money for whatever you would like. Use extreme caution when considering a cash-out refinance as it increases your debt. While it may feel tempting to get extra cash, it’s dangerous to take out more than you can afford to pay back.

When doing a cash out refinance on a mortgage, you can usually borrow up to 80% of your equity (the market value for the amount of your home you own). But if you choose a cash-out refinance for an investment, like a home, you’re trading in equity for more debt and putting yourself in a riskier situation.

If you’re unhappy with the type of loan that you originally borrowed, refinancing can allow you to change that. For example, if you started with an adjustable rate mortgage and want to switch to something a bit more steady, you can refinance with a fixed rate mortgage.

Refinancing is a fairly simple idea that can be complicated in action. Carefully consider whether the drawbacks and benefits of refinancing will come out in your favor. Be aware that there are costs associated with refinancing a loan since you’re essentially taking out an entirely new loan and can be charged multiple fees.

More questions? Contact one of our mortgage experts at Lake Area Mortgage today!
 

While we hope you find this content useful, it is only intended to serve as a starting point. Your next step is to speak with a qualified mortgage professional who can provide advice tailored to your individual circumstances. Nothing in this article, nor in any associated resources, should be construed as financial, tax or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared, we are unable to guarantee that it remains accurate today.

Start by defining your goals. Consider where you want to live, the features you’re looking for, what you can afford, and a realistic date for having the money you’ll need. Then apply your knowledge to making this crucial decision of purchasing your Minnesota home!

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[av_heading tag=’h2′ padding=’10’ heading=’Minnesota Mortgage Options for Home Buyers’ color=” style=’blockquote modern-quote modern-centered’ custom_font=” size=” subheading_active=’subheading_below’ subheading_size=’15’ custom_class=” admin_preview_bg=” av-desktop-hide=” av-medium-hide=” av-small-hide=” av-mini-hide=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=”] Which Type of Mortgage is Best for Me?
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Exploring Minnesota Mortgage Options In 2021

There is no doubt about it, finding the right mortgage for yourself or your family can feel like a daunting or even overwhelming task. Regardless of whether you’re a first-time homebuyer, buying your dream home, downsizing, flipping, investing or looking for something else altogether, Lake Area Mortgage offers a wide variety of options for your home purchase.

Throughout this mortgage homebuying guide we will illustrate the different types of mortgages, the benefits, and potential pitfalls of each, and hopefully help you decide which mortgage type is best for your situation. Let’s get started!

Mortgage Types:

There are 2 main types of mortgages, fixed rate & variable rate. Within those two main categories there are a multitude of subcategories to customize the payment plans to each consumers’ needs. While there of course are other mortgage options, this is a comprehensive view of what most buyers utilize as a lending vehicle to purchase their first home.

Conventional Fixed-Rate Loan –

This is the most common type of mortgage loan for consumers to finance a home. In this type of loan, the interest rate is fixed at the start of the loan and remains constant throughout the life of the loan. This type of mortgage loan may suit your needs best if you:

• Are looking for security of making a constant, predictable payment month-to-month
• Are planning to stay in the home for the long term (Generally 5+ years)

Down Payment Assistance –

A no closing cost option or low closing cost option greatly reduces the amount of money you need at closing because it covers your third-party charges and waives lender origination fees. At Lake Area Mortgage, we can offer eligible homebuyers unique programs through the Minnesota Housing Finance Agency that help with these issues. You’ll still have a down payment and need money for prepaid reserves (such as property taxes, homeowners insurance, and prepaid interest), but this is a great option if you want to bring less money to closing. Your interest rate may potentially be slightly higher, but there’s no prepayment penalty or hidden restrictions. This option may suit your financial needs best if you:

• Don’t have a lot of money for closing on hand or want to spend less cash in hand upfront
• Are a first-time homebuyer

VA Home Loan –

Through the GI Bill of 1944, if you are a veteran of our military, a widowed military spouse, or an active duty service member, you can apply for a VA home loan to purchase a home. The program is designed to make it easier for qualified purchasers to gain the benefits of homeownership. Interest rates can be better than conventional rates and there is no minimum down payment! That means many eligible buyers can purchase with 0% down. This loan may suit your financial needs best if you:

• Are an active duty service member, veteran, or an eligible family member
• Are needing to finance up to 100% of the home
• Have a low credit score & have a higher debt-to-income ratio

Jumbo Home Loan –

These are like they sound – much larger loans. If your loan is large and it exceeds the conforming loan limit in our area ($548,250 for 2021), then a jumbo loan is needed for the financing. With a jumbo loan you can finance your dream home and enjoy the finer luxuries of Minnesota. This loan may suit your financial needs best if you:

• Are considering a home with a purchase price of $600,000 or greater
• Are looking for a higher loan amount with a competitive interest rate

FHA Loan –

FHA loans provide an advantage over conventional loans because they are backed by the FHA or the Federal Housing Administration, which is the world’s largest mortgage insurer. The FHA does NOT lend money, rather they back the lenders should the borrower’s default on the mortgage. This loan may suit your financial needs best if you:

• Are first time home buyers
• Have average, poor or limited credit
• Need a smaller down payment option
• Need to consider expanded co-borrower options

Bridge Loan –

These loans are typically for people who are moving from one home to the other and want to utilize the equity on their existing home, to put a down payment on their new home. This type of loan acts as a transition vehicle between two properties and allows borrowers to access equity in their current home to use as down payment for their next purchase. We allow borrowers to loan up to 80% of the appraised value of their existing home. This loan may suit your financial needs best if you:

• Are selling your current home and buying a new home or are planning to have your home built
• Desire the convenience of a seamless loan during the selling process of your current home

USDA Loan –

A USDA loan otherwise referred to as the Rural Housing Loan has a 30-year term with an interest rate set by the lender. There is no minimum down payment and allows for 100% financing. It does have income and credit requirements to qualify and can ONLY be used for primary residence. This loan may suit your financial needs best if you:

• Live in a rural area
• Have good credit and verifiable income
• Plan on staying in the home 5+ years

Lot & Land Loans –

These two types of loans are for either short- or long-term financing. A Lot loan is short-term financing used to purchase an improved lot that has curbing and/or utilities in place, with the intent to build a new home or cabin on it within a year. A Land Loan is longer term, typically used to purchase raw land and does not need to be improved land with utilities in place. A land loan is typically used for individuals wanting land to use for recreation or future build. These loans may suit your financial needs best if you:

• Are purchasing land and looking to build a home
• Either short- or long-term property holding

Lake Area Mortgage offers a wide range of mortgage loans, to suit almost any home buyer. Remember, our down payment assistance plans are available on several of our mortgages; make sure to ask about your options

Call us toll free at 1-866-321-1566 to speak with a Lake Area Mortgage lender or visit our site at Lake Area Mortgage today! Our team will work with you to help determine which mortgage type is the best for you!

***Mortgage loans are originated by Lake Area Mortgage, and are subject to credit approval, verification, and collateral evaluation. Programs, offers, rates, terms, and conditions are subject to change or cancellation without notice. Certain conditions apply. ***
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Why You Should Review Your Credit Report

& what to do if you find a mistake.

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Consumers hear a lot about credit scores and why it’s important to keep them within a healthy range. But there’s another best practice that’s key to improving and maintaining good credit: reviewing your credit report.
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[av_textblock size=’24’ font_color=’custom’ color=’#2e7cd1′ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] Credit Score vs. Credit Report: What’s the difference?
[/av_textblock] [av_iconlist position=’left’ iconlist_styling=” custom_title_size=” custom_content_size=” font_color=’custom’ custom_title=” custom_content=’#020202′ color=’custom’ custom_bg=” custom_font=’#3089e8′ custom_border=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] [av_iconlist_item title=’Credit Score:’ link=” linktarget=” linkelement=” icon=’ue8de’ font=’entypo-fontello’] A number calculated by the credit reporting agencies, based on your credit report, to rank your creditworthiness.
[/av_iconlist_item] [av_iconlist_item title=’Credit Report:’ link=” linktarget=” linkelement=” icon=’ue84d’ font=’entypo-fontello’] A detailed report of your financial history, including age and number of credit lines, repayment history, and types of credit.
[/av_iconlist_item] [/av_iconlist] [av_hr class=’invisible’ height=’-50′ shadow=’no-shadow’ position=’center’ custom_border=’av-border-thin’ custom_width=’50px’ custom_border_color=” custom_margin_top=’30px’ custom_margin_bottom=’30px’ icon_select=’yes’ custom_icon_color=” icon=’ue808′ font=’entypo-fontello’ admin_preview_bg=”] [av_textblock size=” font_color=” color=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] Your credit report contains personal information about where you live, how you pay your bills, whether you have filed for bankruptcy, or if you’ve been sued. It lists inquiries that have been made about your credit as well. When you apply for a new credit card and the company says it’s running a credit check, it’s looking up your credit report to review your financial past.
[/av_textblock] [av_textblock size=’24’ font_color=’custom’ color=’#2e7cd1′ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] Get the Facts for Free.

[/av_textblock] [av_textblock size=” font_color=” color=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] When you are trying to improve your credit score, it’s important to track your credit by ordering your free reports from www.annualcreditreport.com. You’re entitled to a free credit report once every 12 months from each of the credit reporting bureaus, Equifax, Experian, and TransUnion, through this website. Many financial advisors suggest that you stagger your requests over those 12 months so that you can monitor them for accuracy and changes.
[/av_textblock] [av_textblock size=’24’ font_color=’custom’ color=’#2e7cd1′ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] If You Find a Mistake…

[/av_textblock] [av_textblock size=” font_color=” color=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] The credit bureau and the company that provided the information to the bureau are both responsible for correcting errors found in your report. If you find any errors, you can dispute these and get them corrected by following these steps:
[/av_textblock] [av_iconlist position=’left’ iconlist_styling=’av-iconlist-small’ custom_title_size=” custom_content_size=” font_color=” custom_title=” custom_content=” color=’custom’ custom_bg=” custom_font=’#3089e8′ custom_border=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] [av_iconlist_item title=’Send a dispute letter to the reporting company documenting each error on your report.’ link=” linktarget=” linkelement=” icon=’ue812′ font=’entypo-fontello’][/av_iconlist_item] [av_iconlist_item title=’Send a letter to the creditor who provided the incorrect information.’ link=” linktarget=” linkelement=” icon=’ue812′ font=’entypo-fontello’][/av_iconlist_item] [av_iconlist_item title=’Explain why you dispute each item and request that the errors be removed or corrected.’ link=” linktarget=” linkelement=” icon=’ue812′ font=’entypo-fontello’][/av_iconlist_item] [av_iconlist_item title=’Include copies of documents that support your position.’ link=” linktarget=” linkelement=” icon=’ue812′ font=’entypo-fontello’][/av_iconlist_item] [av_iconlist_item title=’If your dispute results in a change to your report, the credit bureau must give you a free copy to review.’ link=” linktarget=” linkelement=” icon=’ue812′ font=’entypo-fontello’][/av_iconlist_item] [av_iconlist_item title=’Ask the company to send notices of correction to anyone who requested your credit report in the last six months.’ link=” linktarget=” linkelement=” icon=’ue812′ font=’entypo-fontello’][/av_iconlist_item] [/av_iconlist] [av_textblock size=” font_color=” color=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] Reviewing your credit report and seeing your financial history in detail can help you see where there is room for improvement. Staying within your budget, paying off your debts, and limiting your credit cards can set you on the path to a higher credit score and more favorable loan terms. Our award-winning team of mortgage professionals are always available to discuss your eligibility for a home loan! Contact us today!
[/av_textblock] [av_textblock size=’10’ font_color=” color=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” admin_preview_bg=”] *Lake Area Mortgage; A Division of Royal Credit Union is not a credit counseling or financial advisement firm. This information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation.
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