If you are on the fence about mortgage refinancing, there are a number of great reasons to refinance your mortgage regardless of what interest rates are doing. With mortgage refinancing you can reduce your monthly payment, lower your interest rate, and even cash out equity in your home for any reasons. Here is a list of five excellent reasons to help you decide if mortgage refinancing is right for you.
I. Mortgage Refinancing to Reduce Your Monthly Mortgage Payment
The most common reason homeowners have for mortgage refinancing is to lower their monthly mortgage payments. There are several different ways to accomplish this. If you plan on staying in your home for a long time, consider paying a point or two in order to buy down your mortgage interest rate. If your financial situation has improved since purchasing your home, you may qualify for a better interest rate without points. If you are unable to qualify for a lower rate, you can still lower your monthly mortgage payment by extending the term length of your mortgage loan. Mortgage loans typically come with a term length of thirty years; however, there are now forty and even fifty year mortgages to choose from.
II. Mortgage Refinancing to Switch Your Adjustable Rate Mortgage (ARM)
If you purchased your home with a risky Adjustable Rate Mortgage and concerned with the risk of rising interest rates, refinancing to a fixed interest rate loan could give you the financial peace of mind you need. Fixed interest rate loans typically come with higher rates than adjustable rate mortgages; however, you can lower your payment amount with the new interest rate by extending the term length. A lower payment with a fixed interest rate mortgage will allow you to plan your monthly budget around the mortgage payment.
III. Mortgage Refinancing to Avoid Balloon Payments
Balloon mortgages are popular because they come with very low monthly payments; however, once the balloon payment is due you could be facing a financial hardship if you’re unable to pay. Refinancing to a fixed or adjustable rate with a long term length could match your current payment amount.
IV. Mortgage Refinancing to Stop Paying Private Mortgage Insurance
Many homeowners that purchase their homes with less than 20% down or borrow above a certain level of home equity are required to purchase Private Mortgage Insurance. Private Mortgage Insurance is expensive; the premiums can add hundreds of dollars to your monthly payment amount and does nothing else for you. Private Mortgage Insurance only protects the lender from losses if you default on the mortgage. Even if you have not build up sufficient equity in your home there are a number of mortgage refinancing programs to help you drop this costly insurance.
V. Mortgage Refinancing to Borrow Against Your Home’s Equity
Another popular reason for mortgage refinancing is to cash out equity in your home. This cash can be used for any reason: you can pay off credit cards, make repairs to your home, pay for college, even purchase a new car or take a vacation. With cash-back mortgage refinancing this is fast and easy. You even gain a tax deduction for the interest you pay when borrowing against your home equity.
To learn more abut your mortgage refinancing options, including costly mistakes to avoid, register for a free mortgage tutorial.
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Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
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