Refinancing your home often has many advantages. You can take advantage of lower mortgage rates, pay less on your overall loan and put more money back into your pocket each month. Here are five awesome reasons why you should refinance now.
Lower Monthly Payments
Unless you plan on moving to a new home sometime soon, refinancing your mortgage loan can lower your monthly payments. Chances are that you are in a better financial situation now than you were when you bought the house unless you have had financial difficulties recently. If you have been able to pay your bills on time and have not had any major financial catastrophe, you can often get a better rate which leads to lower payments. You will pay some upfront costs for the refinancing, but you will soon recover those costs if you stay in the home for a few more years.
Switching between Mortgages
If you signed up for an adjustable-rate mortgage or some other type of mortgage besides a fixed-rate, refinancing your loan will give you the opportunity to switch. Adjustable-rate mortgages are always uncertain because you never know how much you will pay from month to month because the interest rate is always fluctuating. Other types of mortgages are also less than ideal. If you have anything but a fixed-rate mortgage, consider switching to one once you do your refinance.
Get Rid of Your PMI
Private Mortgage Insurance, or PMI, allows you to purchase a home if you are unable to put at least 20 percent down. This insurance helps ensure the lender will get their money if you default. However, when you refinance, you can get rid of this extra payment as you pay down your mortgage. Check with your lender to see if you are eligible to go without PMI before you stop paying it.
Tapping Into Your Home’s Equity
If you have been paying on your home for several years, chances are that you may have some equity built up in it. When you refinance at lower mortgage rates, you can tap into that equity and use some of it for home improvements, paying down debt or taking that much needed vacation you have been putting off for years. In some cases, the money you receive after refinancing can even be tax deductible!
Get Out of a Balloon Payment
Balloon payments often sound like a good idea at the beginning of a mortgage, but they can be disastrous later on. At the end of the loan term, you will be responsible for paying the entire balance of the loan or risk losing your home. Instead, choose to refinance and get into a fixed-rate mortgage so you can pay the same payment every month until your home is paid off.
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