NJ Loan Programs: Why You Should Consider Refinancing

Considering the option of refinancing your current mortgage can be as stressful and confusing as when you first signed what seemed like thousands of pages on your first mortgage. But given that there is numerous refinancing NJ loan programs, there may be a good reason to consider refinancing in the current economic environment because interest rates are pretty low right now. In addition, that’s not the only reason to consider refinancing. Maybe your credit score has improved and now you might be eligible for a lower-rate mortgage or you’re not comfortable with the current type of mortgage you have – so changing the form of the mortgage (i.e. switching from a adjustable rate to a fixed) might be on you’re mind.

There are plenty of NJ loan programs, and refinancing your current mortgage is one of them. Your home is probably your most valuable financial asset so prudent decision making is wise when considering a lender/broker and specific mortgage terms because most people don’t realize that along with the potential benefits that come with refinancing, there are also costs.

The essence of a refinance is as follows: you pay off your existing mortgage and create a new one. You may even decide that it wouldn’t be a bad idea to combine your primary mortgage and a second mortgage (if you have one) into a new loan. It’s important to realize that when you refinance you will often go through some of the same procedures as with your original mortgage as well as some of the same costs.

NJ Loan Programs: Refinancing and Interest Rates

The interest rate on your mortgage is tied directly to how much you pay monthly on your mortgage payment. Simply put, a lower interest rate NJ loan programs equals lower monthly payments. A lower interest rate may be achievable because of market conditions or because your credit score has improved. Probably most important when it comes to a lower interest rate NJ loan program is that it will help you build equity in you home more quickly because more of your monthly payment is actually going towards the principal versus the interest.

NJ Loan Programs: Refinancing and Adjusting the Length of Your Mortgage

There are generally two options here: increasing the term of your mortgage and decreasing the term of your mortgage.

• Increasing the term of your mortgage: This may be an attractive option in order to reduce the amount that you pay each month. However, this will increase the length of time you will make mortgage payments and the total amount that you end up paying toward interest.
• Decreasing the term of your mortgage: Shorter-term mortgages (i.e. 15-year vs. 30-year mortgage) generally have lower interest rates. In addition, a shorter term allows you to pay your loan off sooner and ultimately reducing your total interest costs. However, your monthly payments will be higher because you paying more the principal each month.

NJ Loan Programs: Changing from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage

If you have an ARM, your monthly payments generally change as the interest rates change. As a result, your monthly payments can increase or decrease. This may make you very uncomfortable, as most of us live on tight budgets, so if all of a sudden a mortgage payment goes up, this could be difficult to accommodate. In this case, refinancing to a fixed-rate mortgage might assuage your anxiety as you then will have a steady interest rate and thus a constant monthly payment.

Another refinancing NJ loan program would be if you have an ARM and simply choose to refinance to another ARM with better terms. For example, the refinanced ARM may start out with a lower interest rate or offer smaller interest rate adjustments or lower payment caps – which simply means that the interest rate cannot exceed a certain amount.