Refinancing your home can help you save hundreds of dollars on your monthly payment and save you more over the life of your loan. But when should you apply for a refinance? We have listed the best reasons to refinance your home. You will need to decide if refinancing makes sense to you in your particular financial situation.
Refinance To Lower Your Interest Rate: When your goal is to pay less every month, you can refinance into a loan with a lower interest rate. As of right now, mortgage rates are still incredibly low. Let’s say, for example, your current rate is higher than 4%, and your credit score has increased since you purchased your home. You can lower your rate by almost 1% or the most current lower rate.
Refinancing to Access Your Home’s Equity: Homeowners often access the equity in their homes to cover major expenses, like the costs of home remodeling or purchasing an investment property. Remodeling can still help you build more equity in your home, and investing your money in another property will also build wealth.
Get Rid Of Your Private Mortgage Insurance By Refinancing: Refinancing might enable you to eliminate PMI if your new mortgage balance is below 80 percent of the home’s value; this could save you 1000s of dollars.
This refinancing tactic works if your home has gained substantial value since the last time you obtained your mortgage. For example, if you bought your house 5 years ago and the value has risen by more than 20 percent, now you owe less than 80 % of what the home is worth. Under these circumstances, you can refinance into a new loan without having to pay for “PMI”.
Refinancing to Get a Shorter Loan Term:If you refinance from a 30-year to a 15-year mortgage, your monthly payment will often increase. But, not only is the interest rate on 15-year mortgages lower, shaving years off your mortgage will mean paying less interest over time.
In 2019, 78% of borrowers refinanced from a 30-year fixed-rate mortgage into the same loan type, according to Freddie Mac. Another 14% went from a 30-year to a 15-year fixed. And 7% went from a 30-year to a 20-year fixed.
Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan, or helps you build equity more quickly. Before you refinance, take a careful look at your financial situation or schedule a quick consultation with our team if it may be confusing to you. We can see what makes sense for you and your financial goals.
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