Refinance – 5 Reasons Why You Should Do It

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 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.

Switching From An Adjustable Rate To A Fixed Rate Mortgage Adjustable rate mortgages (ARMs) can provide lower initial monthly payments for those who are willing to risk upward market adjustments. Also, they are ideal in case you are not planning to own your property for more than a few years. However, you may want to swap your adjustable rate for a 15-, 20- or 30-year fixed rate mortgage if you have made your house a permanent home. Your interest may be higher than with an ARM, but you have the confidence of knowing what your payment will be every month for the rest of your loan term.

Escape Balloon Payment Programs Like adjustable rate mortgage programs, balloon programs are great when you want lower rates and lower initial monthly payments. However, if you still own the property at the end of the fixed rate term (usually 5 or 7 years), the entire balance of your mortgage is due to the lender. Being in a balloon program would mean that you can easily switch over into a new adjustable rate mortgage or fixed rate mortgage.

Removing PMI or Private Mortgage Insurance Zero or Low down payment options allow homeowners to purchase homes with less than 20% down. The bad news is that most of the time, they need private mortgage insurance which is designed to protect the lender from loan default. As the balance on your home decreases and the value of your home increases, then it’s likely for you to be qualified 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.

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