There are many reasons why you should refinance. With lower cost, adjustable rate, and 0-down options, traditional loan programs like 30-year or 15-year fixed rate mortgages don’t always allow us to meet our financial goals. As long as you reduce your mortgage interest rate a little, then you can save big over the life of your home loan. In fact, there are actually 5 reasons why you should refinance.
Lower Your Monthly Payment If you plan to live in your home for a few years, it may make sense to pay a point or two to decrease your interest rate and overall payment. What you would have done in the long run is pay for the cost of the mortgage refinance with the monthly savings. On the other hand, you may not be in your home long enough to recover the refinancing costs if you plan on moving in the near future. Calculating the break-even point can help determine whether it makes sense so this is a must before deciding to refinance.
Switch Over From An Adjustable Rate To A Fixed Rate Mortgage. For those who are willing to risk upward market adjustments, lower monthly payments can be provided by adjustable rate mortgages or ARMS. They’re also ideal if you don’t plan to own your property for more than a few years. If you have made your house a permanent home, then this would mean you may want to swap your adjustable rate for a 15-, 20- or 30-year fixed rate mortgage. Even though your interest is higher than with an ARM, knowing what your payment will be every month for the rest of your loan term is what you are confident about.
All about Escape Balloon Payment Programs Balloon programs, like adjustable rate mortgage programs, are great when you want to lower rates and lower initial monthly payments. However, the entire balance of your mortgage is due to the lender if you still own the property at the end of the fixed rate term (usually 5 or 7 years). You can easily switch over into a new adjustable rate mortgage or fixed rate mortgage if you are in a balloon program.
Remove Private Mortgage Insurance (PMI) With zero or low down payment options, homeowners will be allowed to purchase homes with less than 20% down. What’s unfortunate is that private mortgage insurance, which is designed to protect the lender from loan default, will be required most of the time. As the value of your home increases and the balance on your home decreases, you may be eligible to remove your PMI with a mortgage refinance loan.
How to Cash in on Your Home’s Equity A great resource for extra cash is your home. Your home, like most homes, probably has increased in value and that gives you the ability to take some of that cash and put it to good use. You can make home improvements, pay tuition, replace your current car, take a long-overdue vacation or even pay off credit cards. With a cash-out mortgage refinance transaction, it’s easy. Not to mention it is also deductible.
