With mortgage rates still sitting at historic lows, refinancing is a great option to consider if you haven’t done so in the last couple years. Below are six reasons for why you may want to consider a refinance.
1. You want to save money each month.
Your monthly payments will be reduced if you get a low rate or when your loan term is extended. However, with an extended term, your monthly savings will increase but you’ll be paying more in total interest for the life of the loan.
2. You want to pay down your mortgage more quickly.
You can shorten the length of your mortgage by reducing the loan term. Monthly payments will more then likely go up, but you will be able to save more in the overall interest payment. You will be debt free in a shorter time.
3. You want to debt consolidate your credit cards.
If you have enough home equity, you can borrow more than your current loan balance (restrictions apply). With the extra cash, you can pay off high interest debts such as credit card balances or installment loans with a lower interest home equity loan. You will additionaly benefit because mortgage interest is deductible and credit card interest is not.
4. You wish to combine a first and second mortgage into one.
If there’s enough equity in your home you can consolidate a first and 2nd mortgage into a single first mortgage. The monthly payment on the new loan may even be lower than the combined payments on the first loan and the second mortgage.
5. You want to convert an ARM into a Fixed Rate Mortgage.
This allows you to lock in at a low rate. You can thus repay the loan with stable monthly payments rather than variable payments over the loan term.
6. You want to remove PMI from your current loan.
If the new proposed loan balance is below 80% of the new appraised home value you can refinance into a new mortgage and stop paying PMI insurance.