there are many great reasons to refinance. with new, lower cost and no-cost
mortgage refinance options, traditional rules like refinancing only when rates
drop at least two percentage points lower than your current mortgage, no longer
apply. today, even reducing your mortgage interest rate a little can save you
big over the life of your home loan. take a look at these five great reasons to
refinance:
1. lower your 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. over the long
run, you will have paid for the cost of the mortgage refinance with the monthly
savings. on the other hand, if you plan on moving in the near future, you may
not be in your home long enough to recover the refinancing costs. calculating
the break-even point before you decide to refinance can help determine whether
it makes sense.
2. convert from an adjustable rate mortgage to a fixed rate.
adjustable rate mortgages are great if you want lower initial monthly payments
and are willing to risk upward market adjustments. they're especially ideal for
homeowners who don't plan to own a particular property for an extended period
of time. however, if you are looking for more stability, you may wish to
convert your adjustable rate mortgage to a 15-, 20-, or 30-year fixed rate home
loan. though the interest rate may be higher, you have the confidence of
knowing exactly what your mortgage payment will be each month. adjustable rate
mortgages, on the other hand, can increase monthly payments to a level you no
longer can afford.
3. balloon payment is due.
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 the lender. in this situation, a
mortgage refinance into a new adjustable rate mortgage home loan or fixed rate
makes sense.
4. remove private mortgage insurance (pmi).
low down payment home purchase options allow homeowners to purchase homes with
less than 20% down. however, they also usually require private mortgage
insurance, which is designed to protect the lender from default. as the value
of your home increases and the balance of your home loan decreases as you make
your monthly mortgage payments, you may be eligible to remove your pmi the next
time you refinance your home.
5. cash out on your home equity.
your home is a great resource for extra cash if you have equity. you can use
the cash to finance your child's education, pay for home improvements,
consolidate high interest debt, or take a vacation. with a cash-out mortgage
refinance transaction, it's easy. and it’s even tax deductible.
call and speak with one of our home mortgage bankers to see if refinancing makes
sense for you. you can also sign up for our free
rate watch monitoring service to notify you when interest rates drop.
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