Refinancing your mortgage is a great way to use the equity you have in your home!
There Are Many Reasons to Refinance
The first step in considering if you should refinance your mortgage loan is to determine if it fits in with your financial goals. The most common reasons for refinancing a mortgage are: to substantially reduce monthly payments, shorten the mortgage term, or take cash out.
Lowering Your Monthly Payment
A lower monthly mortgage payment is desirable for many homeowners, as it means more room in the budget for other necessities. If interest rates are significantly lower than they were when you bought your home, it’s worth talking to us to see what the new rate could be. Getting a lower rate means lowering the interest portion of your monthly payment – and that means big savings in the long run.
You could also refinance to get rid of mortgage insurance (PMI) a monthly fee many homeowners pay to protect the lender in the event that there is a default on the loan. Mortgage insurance is typically required when the consumer put down less than 20%. You could save hundreds of dollars a month by refinancing to stop paying this monthly mortgage insurance.
Finally, another way to lower your monthly payment by refinancing is to change your mortgage term. By lengthening your term, you can stretch out your payments over more years, which makes the payments smaller.
Shorten The Term Of Your Mortgage
Shortening the term of your mortgage is another fantastic way to save money on interest. Usually when you shorten the mortgage term, it means that you will receive a lower interest rate. A lower interest rate plus fewer years of payments can mean saving a lot of money in the long run.
Something you need to consider when you think about shortening your mortgage term is that it will most likely increase your monthly payment. The good news, however, is that less of your payment goes toward the interest, and a higher percent goes toward paying down the balance of your loan. This will allow you to build equity, plus pay the house off faster.
Taking Cash Equity Out
When you choose a cash-out refinance, you are refinancing the loan for a higher amount than you currently have, and keep the difference in cash. The proceeds that you receive from this option are tax-free.
Many homeowners use this cash to pay off their credit cards or other debts. You can also use the cash for home improvements, or any other need that you may have. Contact us if you have more question about this option.