What do you think when you hit “send payment” to your mortgage lender every month? Are you sure that you have the best mortgage rate possible? If you have doubts that your current mortgage is the best you can get, then it might be high time to think about a home refinance.
There are many benefits to refinance a home. Refinancing your home is a great way to reduce your interest rate, decrease your monthly payments, pay your house off faster, or use the equity in your home to get some much-needed cash.
Mortgage refinancing offers multiple benefits; here are some to consider:
You might be able to refinance with a lower interest rate if your financial situation has improved.
Review your mortgage statement to see the current interest rate of your home loan. Maybe when you first took out your home loan, your FICO score was less than stellar. Possibly you had some ugliness on your credit report that you have been able to resolve over the last few years.
If you managed to improve your financial situation since you took out your mortgage, you might be able to qualify for a lower interest rate loan. Of course, a lower interest rate could mean lower monthly payments. The money you save could be used to consolidate non-mortgage debt, pay for college, or it could be put into a rainy day fund. Either way, more money in your pocket every month is a good thing.
You could reduce your monthly payments if you purchase points.
Let’s say you haven’t had any significant change to your financial situation since originally taking out your home loan and a lower interest rate isn’t available. Consider purchasing points from your mortgage company. Discount points can lower your interest rate.
You might think to yourself: Is purchasing points a good idea? If you have a 30-year-loan, it might make sense to purchase points. During the life of a 30-year mortgage, a lower rate paid every month would result in significant savings.
Not sure about your specific situation? There are mortgage point calculators online to help you calculate your options. For specific answers to your refinancing questions, it is best to contact a mortgage professional.
You may be able to change the term of your loan and pay your home off faster.
Another benefit of refinancing your home is that you could reduce the life of your mortgage from 30-years to 15-years. Imagine, you could pay off your mortgage in only half the time.
If you cleaned up your credit, you might be able to qualify for a lower interest rate mortgage. You might earn more money now than you did in the past. Take advantage of any of the above positive changes and consider refinancing your home from a 30-year to a 15-year-term. A 15-year mortgage might have a lower interest rate than a 30-year mortgage. So even if your monthly payment goes up just a tad, you will make fewer payments in the life of the loan, and you will be free from your mortgage faster.
You may be able to receive cash from your home’s equity when refinancing your home.
Did someone say cash? Refinancing your home is a great option if you want cash for home improvements. You can also use the cash to finance a college education or to consolidate non-mortgage debt. Do you have enough home equity for a refinance? Consider refinancing it and get cash-back.
In a cash-back refinance, homeowners can take out cash and refinance their home with a new mortgage. Homeowners are free to use the cash any way they wish. Cash-back or cash-out refinance is a great way to use some of your home equity.
Whatever your reason, refinancing your home has many benefits. It may help you save money, pay off debt, or shorten the life of your home loan. But just like all major financial decisions, first talk with a mortgage professional to make sure refinancing is the right option for you.