Benefits to Refinancing Your Mortgage
Lower Interest Rates & Monthly Payments
With rates trending towards record lows, there has never been a better time to consider refinancing your mortgage. Reducing your interest rate not only helps you save money, it also increases the rate at which you build equity in your home and can decrease your monthly payments.
What is equity?
Your equity is the value of ownership you have built up in your home. To calculate your home equity, subtract any outstanding loan balances from your home’s market value.
Favorable Mortgage Terms
When interest rates fall, homeowners have an opportunity to refinance their existing home loan for another loan that has a significantly shorter term. Shorter-term = fewer mortgage payments = happy you!
Cash-out refinancing is when you take out a new mortgage for more than you owe, allowing you to take the difference in cash or to use towards paying off existing debt. You will want to make sure you weigh your options carefully, as this option may come with some risks. On the plus side, you could pay off high-interest debt like a credit card, however, you would be trading in an unsecured debt for a secured debt. Miss credit card payments, you get a hit on your credit score. Miss mortgage payments and you could lose your home.
Eliminate Mortgage Insurance
If you purchased your home originally with less than 20% down, you have likely been paying for private mortgage insurance on top of your monthly payments. If your home value has increased enough since your initial purchase, a refinance could lead to an end of those insurance payments!