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Does Refinancing Your Mortgage Make Sense? (Tara Mortgage Services Featured Blog)
Dated: August 16 2020
Mortgage rates are in record lows prompting many Americans to refinance their home loans and for good reasons! Refinancing has both immediate and long-term advantages. Does it make sense for you? Take the quiz below to find out! If any of these scenarios sound like you, then chances are refi is an excellent option.
Do You Want To Save Money By Paying Less Interest?
The most common reason that Americans refinance their loans is to save money. Even if you are not having cash flow problems, lowering your monthly mortgage bill is very appealing. Some save as much as a few hundred dollars every month!
How do savings occur? The lower monthly payment comes from a combination of lowered interest charges and possibly changing the type of loan. Remember that a refinance comes with closing costs, so you'll want to calculate this cost to get a clear, long-term picture of how much you'll save over the life of the loan.
Will A Different Home Loan Program Serve You Better?
Some choose to refi their loan not because they want a lower rate, but because they want to change to the type of loan. This is often the case with an ARM loan, as some worry that they will not be able to make the payments once the readjustment time comes. Changing the Adjustable Rate Mortgage into a fixed-rate one is how you can eliminate the risk of too high future mortgage payments.
Keep in mind that, in this instance, your monthly payment may increase slightly. However, you'll have peace of mind knowing that your payments will remain manageable, and your interest rate is in a record low.
Will Cashing Out Equity Help You?
Some choose to refinance to cash out equity to pay for home improvements, education, or simply to have on hand should the need arise in these uncertain times.
Is Consolidating Debts Part of Your Long-Term Financial Strategy?
Some choose to refi to consolidate high-interest-rate debts. This is an especially attractive option since mortgage rates are usually much lower than credit card interest rates. However, it's important to be thoughtful of your strategy when it comes to refinancing unsecured debts with a secured loan.
In other words, be purposeful about avoiding additional credit card debt after you've consolidated. This ensures that transferring the debt to your mortgage is worth it, and your monthly obligations remain manageable.
Do You Need To Remove a Borrower From Your Current Home Loan?
There are situations in which you may need to change who's responsible for paying the mortgage. This is often the case in divorce, but there are other circumstances in which a borrower needs to be removed. Refinancing is how you can do just that.
Note that removing them from the loan does not automatically remove them from the deed. That will have to be done separately.
Do You Want To Eliminate FHA Mortgage Insurance?
FHA loans come with mandatory "built-in" mortgage insurance, and unlike a traditional loan, FHA mortgage insurance is required throughout the life of the loan. The only way to remove it is to refinance into a different loan product. Most often, a conventional loan is the best option for achieving this. With a traditional loan, private mortgage insurance (PMI) is only required until you have reached a certain amount of equity in your home.
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