Reasons to Refinance Mortgage
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 mortgage 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
Artisan Mortgage
professionals to see if
refinancing makes sense for you.
