Five Reasons to Refinance

Mortgage Rates have dropped again, so even if you refinanced as recently as last year it is worth finding out if refinancing is beneficial for you. Here are some financially beneficial reasons that you should refinance:

  • To Reduce/Remove Monthly Mortgage Insurance

    If you refinanced or purchased a property with an FHA Home Loan you will be making a payment for mortgage insurance premium with your regular monthly mortgage payment. Mortgage insurance is required if the equity in your home is less than 20%. With the increase in recent times of home prices, there is a good chance that your home will be worth more than when you last refinanced or purchased the property. If it turns out that the current mortgage is less than 80% of the value of the home than you can refinance to get rid of the mortgage insurance premium and hopefully to a lower rate as well.

  • To Move to a Fixed Rate

    Interest Rates will eventually rise, if you are currently in an adjustable rate mortgage (ARMs) it is really a good time to refinance into a fixed rate. Why? Interest rates are low and also ARMs carry the risk of payment shock (the risk that your monthly required payment will increase drastically with an increase in the index rate) whereas Fixed Rate Mortgages do not.

  • To Pay Off Your Home Faster

    With Interest Rates being low you may be able to refinance into a 15 year mortgage with little change to your current monthly cash outlay. What that means is that for approximately the same amount that you pay currently, you may be able to refinance to a 15 year mortgage, so you may be able to pay off your mortgage in 15 years as opposed to the current 20+ years you probably have left on your current loan. Also, if your term reduces and so does the interest rate, the amount of interest that you pay would also decrease as compared to the current loan.

  • To Cash Out

  • This is a good option if you are carrying credit card or other debt at high interest rates. Refinancing with cash out essentially means that you are pulling cash out against the equity in the house. The idea is that with this cash you pay down the higher interest rate debt thus decreasing the overall cash outlay every month which will leave you with money in your pocket. An added benefit – you may be able to deduct the interest paid on your individual tax return.

There are many more reasons to refinance, but whether it is beneficial for you or not is something that can be determined based on your individual circumstances. Having a mortgage broker evaluate your circumstances is a good place to start.

For more information, contact out knowledgeable brokers at Loan People USA.


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