Why refinance? For some, it’s the appeal of lower monthly payments, while others want to shorten the term of their loan. And for some lucky homeowners, it’s possible to do both with the current mortgage programs like HARP and historically low rates. If you’ve been thinking about refinancing, here are seven good reasons why you should.
- Take advantage of HARP while you can. The Home Affordable Refinance Program, better known as HARP, is a federal program aimed to help qualified borrowers refinance into a more affordable mortgage. This refinance option can include a lower interest rate, a reduced principal, no minimum credit score, and more. What’s the catch? HARP isn’t going to last forever. Act now and see if you’re eligible to cash-in on this limited opportunity! (HARP Expired 12/31/2018)
- Reduce your interest rate. Rates are still near historic lows, and they may be able to help reduce your monthly mortgage payment. For example, on a $200,000 mortgage with an original interest rate of 5.5%, refinancing to a 30-year fixed rate mortgage at 4.0% would reduce your monthly payment by $679.34/month. Use this handy refinance interest savings calculator to run the numbers for your own scenario. (Remember that refinancing may increase the length of your loan and the total amount of interest you pay over the life of your loan.)
- Shorten your loan term. If you’ve been making mortgage payments for several years, you may be able to refinance to a shorter loan term and pay about the same each month. For some homeowners, it may even be possible to shorten your loan term AND pay less each month. As a borrower, you should inquire about your options and term availability to find a refinance that makes financial sense for you.
- Consolidate your home loans. If you have both a mortgage and home equity loan or line of credit, consider refinancing both loans into one. Depending upon the interest rates, you may be able to lower your total monthly payment amount and/or the total amount of interest you pay over the life of your loan.
- Pay off credit cards or other major expenses. Many homes have increased in value since the 2008 recession. If that’s true for your home and you have credit card debt, it may be the perfect opportunity to pay off those high-interest cards with a cash-out refinance. Essentially, you’d be turning the equity established in your home into cash to pay down the debt. Why? According to Bankrate.com, the national average interest rate for a variable interest credit card is currently 16.31%, about quadruple the interest rate for a home loan. Needless to say, you’d be reducing the amount of interest you’re paying on borrowed money. If other major expenses are more of concern to you, money earned from a cash-out refinance can also help pay for things like home renovations, tuition, and more!
- Eliminate your mortgage insurance or reduce it. If you pay private mortgage insurance (PMI) each month, refinancing may be a smart way to eliminate PMI. Especially in this market where home values are rising nationwide, the equity in your home may have increased to 20% or more; in which case you should be able to refinance to a conventional mortgage that doesn’t require PMI. In some cases you may be able to lower your loan balance as well as avoid paying PMI.
- If you can’t eliminate PMI through refinancing, you may be able to reduce it. In 2015 the Federal Housing Administration (FHA) reduced the mortgage insurance premium rate on FHA loans from 1.35% to .85%. For the typical first time homebuyer, this reduction can mean an average interest savings of $900 a year! But you won’t get this reduction automatically so if you have an FHA loan and are paying PMI, check with your lender about taking advantage of this reduction in PMI.
- Explore your loan options. If your current mortgage isn’t working for you, consider refinancing to stop sweating the monthly mortgage payment and regain your financial control. Refinancing may enable you to switch to an entirely different home loan with unique benefits. For example:
- You may be entitled as a U.S. Veteran to refinance with a VA mortgage loan. Veterans, including active-duty personnel, reservists, National Guard members and in some cases, surviving spouses, become homeowners everyday by using this great VA benefit.
- Another option is to refinance with an FHA loan, even if you have little or no equity in your home, a much lower credit score or higher debt than lenders typically accept.
With current mortgage rates so attractive and so many refinancing options available, you may want to throw open that refinancing window, and climb through it! Why not call one of our Home Loan Specialists now at 1-800-700-9212 and discuss your mortgage situation. There’s no obligation. We’re here to help.