Thinking about refinancing your home loan, but not totally committed yet? Here are six good reasons why homeowners refinance their loans and why you may consider doing so too.
1. Reduce Your Interest Rate
When rates drop, you could reduce your monthly mortgage payment. For example, on a $200,000 mortgage with an original interest rate of 5.5%, refinancing to a 30-year fixed rate mortgage at 4.0% would reduce your monthly payment by $679.34/month. Use our refinance calculator to run the numbers for your own scenario.
2. Shorten Your Loan Term
If you’ve been making mortgage payments for several years, you may be able to refinance to a shorter loan term and pay about the same amount each month. For some homeowners, it may even be possible to shorten your loan term AND pay less each month. As a borrower, you should inquire about your options and term availability to see if refinancing makes financial sense for you.
3. Consolidate Your Home Loans.
If you have both a mortgage and home equity loan or line of credit, consider refinancing both loans into one. Depending upon the interest rates, you may be able to lower your total monthly payment amount and/or the total amount of interest you pay over the life of your loan.
4. Pay Other Major Expenses or Debts
Many homes have increased in value in the last decade. If that’s true for your home and you have credit card debt, it may be the perfect opportunity to pay off those high-interest cards with a cash-out refinance. It is considered best practice to pay down high interest debt when possible. Essentially, you’d be turning the equity established in your home into cash to pay down any high-interest debt or to pay for major expenses like home renovations, tuition, and more.
5. Eliminate or Reduce Your Mortgage Insurance
If you pay private mortgage insurance (PMI) each month, refinancing may be a smart way to eliminate PMI, especially in this market where home values are rising nationwide. The equity in your home may have increased to 20% or more, in which case you should be able to refinance to a conventional mortgage that doesn’t require PMI. In some cases, you may be able to lower your loan balance as well as avoid paying PMI.
6. Explore Your Loan Options
If your current mortgage isn’t working for you, consider refinancing to stop sweating the monthly mortgage payment and regain your financial control. Refinancing may enable you to switch to an entirely different home loan with unique benefits.
With low mortgage rates and so many refinancing options available, you may want to throw open that refinancing window! Get in touch with one of our loan advisors and discuss your mortgage situation. They will be able to answer any questions and help you find a solution that’s just right for you.