Thoughts on refinancing your mortgage but not yet fully committed? Here are six excellent justifications for home owners refinancing their mortgage, and why you might think about doing the same.
1. Lower the interest rate
You might lower your monthly mortgage payment if rates decline. For instance, switching to a 30-year fixed rate mortgage at 4.0 percent would lower your monthly payment by $679.34 on a $200,000 loan with an initial interest rate of 5.5 percent. To run the numbers for your unique situation, use our refinance calculator.
2. Reduce the Loan Term
If you have been paying your mortgage for a while, you might be able to refinance to a loan with a shorter term and pay around the same amount each month. Some homeowners could even be able to reduce their monthly payments while also shortening their loan term. Inquire about your options and term availability as a borrower to determine whether refinancing makes sense for you financially.
3. Combine your mortgage loans.
Consider refinancing your mortgage and any home equity loans or lines of credit into a single loan if you currently have both. You might be able to reduce your total monthly payment amount and/or the total amount of interest you pay throughout the course of the loan depending on the interest rates.
4. Pay other significant costs or debts.
Over the past ten years, the value of many properties has increased. If that applies to your house and you have credit card debt, now might be the ideal time to do a cash-out refinance to pay off those high-interest cards. When possible, paying off high interest debt is seen as best practice. In essence, you would be converting the equity built up in your house into cash to settle any high-interest debt or to cover significant costs like home improvements, tuition, and more.
5. Get Rid of or Cut Back on Mortgage Insurance
If you pay monthly private mortgage insurance (PMI), refinancing could be a wise move to get rid of PMI, particularly in this market where property prices are rising across the board. You might be able to refinance to a standard mortgage that doesn't require PMI if the equity in your property has improved to 20% or more. In rare circumstances, you might be able to both reduce your loan sum and get rid of PMI.
6. Examine Your Loan Alternatives
Consider refinancing if your current mortgage isn't working for you if you want to stop worrying about your monthly payments and take back control of your finances. You might be able to switch to a whole different home loan with special incentives if you refinance.
You might wish to throw open that refinancing window with so many alternatives for refinancing at your disposal! Contact one of our loan consultants to talk about your mortgage circumstances or submit an application right now here. They will be able to respond to any of your inquiries and assist you in identifying the best possible solution.
This article was contributed on Jul 31, 2022