Marylanders are being highly sought after by mortgage lenders, making it a good time for homeowners in Maryland (MD) to refinance their home mortgages. Even small changes in interest rates can save people a bundle, especially over time. And with mortgage companies waiving application fees and legal fees—so called no-cost loans—homeowners would be remiss not to do some inquiring.
Why should you refinance in Maryland?
The most obvious benefit of refinancing is the ability for homeowners to save money on their current mortgage rate. Depending on when you secured your initial loan, you could be paying significantly higher mortgage rates than the current market value. Refinancing allows you to lower your monthly obligations, and often the cost of your total loan.
Refinancing is not just about saving money. Sometimes it’s about tapping into the equity of your home. Your down payment, your monthly mortgage payments and any increase in market value of your home are examples of equity. And that equity has a real monetary value. Refinancing your current Georgia mortgage loan could make it far easier to do home renovations and other improvements, both of which further build your equity.
Some of the best equity-building mortgage options are detailed below.
Build home equity more quickly with a 10 or 15-year loan
When people refinance, many of those with comfortable incomes opt for shorter term loans. These home buyers then take on relatively high monthly payments, even with the lowest interest rates. They do this because it builds home equity more quickly. They also pay less in interest over the course of the new home loan, since the principal owed is being paid down faster.
Additional savings to homeowners come in the form of tax breaks. Home owners are entitled to tax deductions for the interest paid on their mortgage, their property taxes, and points paid. With these incentives, shorter term loans can be very appealing to those who can afford them.
Enjoy lower monthly payments with 30-year refinance rates
Although shorter-term loans may cost less in the long run, many Maryland home buyers choose 30-year mortgages for their lower monthly payments. The reason is simple—not all of us can afford to make the higher payments that come with shorter-term loans like the 10 or 15-year options. The good news is that there are other cost-saving opportunities.
A popular option for people with consistent payment records to their banks and at least a year of residency is the Federal Housing Authority’s (FHA) Streamline Loan. It’s named streamline because it’s designed to be a simple, hassle-free application process. For starters, there’s no home appraisal or income verification needed to get the loan. That’s because people who are eligible for the Streamline loans are already established borrowers within the FHA program. In other words, they are already FHA-insured.
For homeowners who purchased modestly priced houses, the monthly savings from a Streamline loan may not be substantial ($100 or less). However, if those home owners use that $100 to pay down their principal, they can see significant savings over the course of the loan. That is, they will pay down their mortgage months to years ahead of time. Imagine not having to come up with a monthly mortgage as you near retirement or try to fund you child’s college education. That’s a big deal.
Upgrade your property with a Streamline 203(K)
The FHA’s Streamline 203(K) is one of the most popular loan options in Maryland and beyond. Designed for new home buyers, seasoned home owners, and rental property owners, it lets people include the cost of home repairs and upgrades in a refinancing package.
Low refinance rates in Maryland make it an especially attractive time to add improvements like hardwood flooring, a waterproofed basement, stainless steel and energy efficient appliances or even a full second level to your home. In most cases, up to 95 percent of a home’s value plus $35,000 in renovations can be financed. It’s worth looking into.
The cash-out refinance in Maryland
When your home’s market value is greater than what you paid for it, you are in an excellent equity position. In addition to that, if what you owe on your home is less than its market value, your equity position is in even better shape. Banks understand this. They also understand you may not want to sell your home. So, they let you tap into the equity of your home by creating a lending product called a cash-out refinance.
Here’s how an example of how a cash-out refinance in Maryland works:
- Owner purchases a home for $100,000 and puts 20 percent down, leaving a principal of $80,000
- Owner makes payment over a number of years and now only owes $70,000 of principal
- Owner does a cash-out refi with a lender who pays off the mortgage principal and creates a new loan for $100,000, distributing $30,000 cash to the owner
The cash-out refi is an excellent way to get liquid cash that can pay down debt, be used for home improvements, help fund college tuition or make it easier to afford a new car. You will be charged fees by your lender, but typically they are spread out over the course of the loan within the monthly payments. Doing a cash-out refi extends the life of your loan, so it’s not for everybody. But anyone who does it, will see what may be some much-needed cash.
The moral of the refinancing story is this: Ask your lender questions and communicate your financial goals and needs clearly. You can also use tools like a mortgage calculator to help determine which refinance options is best for you. Chances are there will be a solution that works just right for your situation.
Back to Mortgage by Area