Refinancing your mortgage sounds like a total nightmare you had last week, right? Fortunately, with living in this pandemic of COVID-19, this is doable. Below are four reasons that may lead you into thinking about doing so:
#1 – Lower Your Interest Rate (Rate-and-Term Refinance)
This is possibly the most popular reason for refinancing a home loan. Refinancing usually means going with shorter-term mortgages which ultimately, no matter what, leads to high monthly payments. If there is room in your budget that allows you to follow through with this option, it will all pay off in the long run. It is a win-win right now with our current low-rate environment saving you money on interest, while also paying it all off as a whole much faster.
#2 – Eliminate Mortgage Insurance
You may have a home loan through private mortgage insurance (PMI) or possibly insured by the Federal Housing Administration (FHA). This is usually the path people take who might have little savings and/or not-so-good credit. To put in the simplest of terms, homeowners can refinance an FHA loan to a more conventional mortgage once they are able to gain 20 percent of the equity in their home.
#3 – Cash Out
In a case you can reduce the interest rate on your mortgage and still take cash out of your home to pay off bills or do the renovations you’ve been needing, then a cash-out refi is for you! The risky business in this involves refinancing your mortgage for a larger sum than what you currently owe which leaves your house still collateral for the bank. A good credit score will do you well here. Smart ways to use the cash-out refi include paying off high-interest credit card debt and all of those renovation projects you’ve had your mind on.
#4 – Move to Fixed Rate
Being a ball of nerves because you have an adjustable-rate mortgage (ARM) is no one’s cup of tea. Move to a fixed-rate loan and if you plan to stay put for a while, this can be a much cheaper option!