Deciding to refinance
Breakeven Point
Loan types
Loan terms
Streamline Refinances

Deciding to refinance
When you refinance, you payoff your existing mortgage with the proceeds from a new loan. 
Some reasons and advantages of refinancing include:

Reason #1:  Lower interest rate and monthly payments
Many homeowners consider refinancing as interest rates drop.  Lowering your interest rate can reduce your monthly mortgage payments as well as the amount of interest you pay over the life of the loan.  As a result though, you could lose some future tax deductibility/savings you would otherwise have with a higher rate loan.  Please consult a tax advisor for guidance on mortgage interest deductibility.

Reason #2:  Payoff your mortgage faster
Refinancing to a shorter term allows you to build your home equity faster.  You could save thousands of dollars in interest charges over the life of the loan. 

Reason #3:  Take cash out of your property
You may be able to refinance your mortgage for more than you currently owe, allowing you to take cash out of your property to use for whatever you wish.

Reason #4:  Consolidating other debts
You may want to refinance in order to payoff an auto loan or credit card debt.  After all, the interest on a mortgage or home equity loan is tax deductible in most cases, while interest on consumer debt is not.  Please consult a tax advisor for guidance on mortgage interest deductibility. 

Reason #5:  Switching loan programs
To help you plan with more certainty, you may want to switch from an existing adjustable rate mortgage to a fixed rate instrument. 

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Breakeven point
Before you refinance, be sure to consider all the closing costs involved in refinancing.  If you decide to refinance, it helps to estimate the break even point it takes for the refinancing decision to pay off.  The breakeven point is the number of months you need to live in your home after refinancing in order to recover the closing costs you pay.  For example, if you pay $2550 in closing costs to refinance and you lower your monthly payments by $150, it would take 17 months to reach the breakeven point ($2550/$150= 17 months).   One common rule of thumb in the mortgage industry is the 2%/24 month rule which says that refinancing is a good deal if you can lower your mortgage interest rate by at least 2% and/or you can recoup your closing costs in less than 24 months.  However, other factors can affect your decision, including the amount of time you will continue to live in the home. 

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Loan types
Most home loans fall into one of two categories:  Fixed-Rate Mortgages and Adjustable Rate Mortgages (ARM’s).  
The advantages of each follow:

Fixed-rate mortgages have interest rates that stay the same for the entire loan term.

• You will have predictable monthly payments throughout the life of the loan.
• You’ll be protected from rising rates.
• Fixed-rate loans are a good refinance option when rates are low.

Adjustable-rate mortgages have interest rates that adjust periodically based on market conditions.

• The initial rate is fixed for an introductory period (1-10 years normally) and is typically lower than a fixed-rate mortgage.  After that, the rate adjusts annually based on a market index, but can’t go above pre-determined rate caps offering protection against large increases.
• Because of the lower initial rate, ARMs are a good way to refinance when rates are not very low. 

Loan terms
The term of a loan is the period of time you will spend repaying it.  The most common term is 30 years, but shorter term options (i.e. 15 years) are available to you.  Whether you’d be better off with a longer loan term or a shorter one depends on a number of factors, including your monthly income and long-term financial goals:

• Longer mortgage terms offer you lower monthly payments, and are a good option if you’re on a tight budget.
• Shorter mortgage terms mean higher monthly payments, but allow you to repay the loan faster and save money on interest expense over the life of the loan.

National City Mortgage Streamline Refinance
If you’re an existing National City Mortgage customer, you may be eligible to refinance your mortgage using our streamlined process.  It will save you considerable time, expense and the need for documentation.  Use our convenient online refinance process to determine your eligibility for this quick and easy option. 

We’re here to help
Whatever refinance reason, loan type or term you choose, National City Mortgage offers a wide variety of options to meet your needs.  Our mortgage professionals can help you find the right combination of loan features to support your financial goals.   Contact us toll free at (877) 508-3339 Monday-Friday, 9:00 a.m.-6:00 p.m. if you need assistance.