How to Get the Most out of Refinancing a Mortgage

Refinancing is not only about reducing your monthly payments.  There are other benefits that may apply to your situation, especially with the low interest rates we are experiencing in this current economy.  Here are five other ways you can benefit from refinancing:

1) Cut the rate and term of your mortgage, but not your payment

Refinancing and not reducing your monthly payments may seem like a waste but here's how it can help. If you don't necessarily need to reduce your monthly payment and maybe can handle a little more, you may want to consider refinancing to reduce the term and rate of your loan. Because of the low rates available, you may be able to get a 20-year mortgage at the same payments as a 30 year mortgage.  The shorter the term, the lower the interest rate. It could save you about 8 years of paying interest.

2) Using equity

If you are planning for big expenses in the future – college tuition, treatments for medical conditions, etc. – consider borrowing while the rates are low.  While refinancing your current mortgage, ask what borrowing a few extra dollars would do to your monthly payments.

3) Replace an ARM with a fixed-rate mortgage

ARMs are good in the few years it is low but when the rate adjusts it can add a lot to your monthly payments. While the rates are low, consider switching to a fixed-rate loan even if your payments are the same as the ARM.  You will have the security knowing that your monthly payments will remain the same throughout the life of the loan.

4) Split a jumbo loan

Homes that have a loan of over $417K (in most places) are called a jumbo loan, which usually have a higher interest rate.  You can benefit from refinancing a jumbo loan by splitting the loan in two.  The first mortgage will have an amount no higher than $417K and the second mortgage would be a Home Equity Line of Credit (HELOC).  This will most benefit borrowers who could pay off the HELOC in 10 years, leaving them with a low interest rate first mortgage.  Check with your local loan officer for the exact amount of a "jumbo loan" category and the amount of equity you would need to make this possible.

5) Merge first and second mortgages

You may be able to do a cash-out refinance and pay off the second mortgage if the two mortgages combined are less than 80 percent of the value of your home. Even though your monthly payment will increase, you will benefit from the refi if the prime rate goes up in a few years since you only have one mortgage.  Check with your local loan officer for options if you have less than 20 percent equity.

For more information on interest rates, refinancing, or any other real estate topics, please contact us at 888-988-6248 or

About the Author

Brandon Lau grew up in Kailua and currently resides in Honolulu with his wife Andee and children Caylah, Elijah, and David. His eighteen years in real estate led him to become a Partner at ChaneyBrooks Choice Advisors. Over the past 10 years he has developed the team and systems that has created a high level of service and value for his clients.

What differentiates Brandon and his team is his consultative approach to real estate. He advises clients with relevant data and expert insight to help them make the best choices in real estate. Good choices in planning for long term dispositions, negotiating for the best price or knowing when not to pursue an investment are ways his consultative services will give you an advantage in the marketplace. His bottom line is providing service with the utmost integrity and expertise.