18 Sep 3 GREAT REASONS TO REFI
Mortgage rates have been holding steady at very low levels. Now is an excellent time to refinance and pay less interest or take advantage of the equity you have built in your home. The housing market has been making a comeback over the last several years. Home values have been on a continual upward trend for some time now.
You may be gaining equity in your home even faster than you would think, based on your monthly payments. This puts you at a particular advantage if you’re looking to take cash out of your home. With rates being as good as they are, it’s a good time to go over 3 great reasons you might refinance:
1. Lower Your Payment
One of the most common benefits of refinancing is the ability to lower your mortgage payment or eliminate your monthly mortgage insurance. If you haven’t refinanced in a few years, you may be able to save money on your payment by lowering your rate.
2. Shorten Your Term
On the flip side of taking a longer term, you can also take a shorter term. You’ll have a higher monthly payment than if you take something like a 30-year term, but the benefit is that mortgage lenders are willing to give you a lower interest rate because they know they will get the money back sooner.
Maybe you have a 30-year loan and have extra money to put toward your principal on a monthly basis. Instead of putting it toward your loan, you put it toward other things like movie tickets or a chair in the shape of a baseball glove. If you like the idea of saving on interest, but lack the financial discipline to set aside more than is required, perhaps a shorter-term mortgage with a higher monthly payment could be just the push you need.
3. Ditch Mortgage Insurance
If you applied for an FHA loan on or after June 3, 2013, in many cases, you have to continue to pay mortgage insurance premiums for the life of the loan.
The good news is that you’re not necessarily stuck forever in your FHA loan with mortgage insurance payments. Once you reach 20% equity in your home, a refinance can remove mortgage insurance. Mortgage insurance payments aren’t required on conventional loans if you have a loan-to-value (LTV) ratio of 80% or less. To calculate your LTV in a refinance, divide your mortgage balance by the home’s value. If you find yourself in an FHA loan, this could be an excellent opportunity for you to pay one less monthly charge.