Even with the recent rise in interest rates, historically they are still at all time lows. Homeowners have been taking advantage of low mortgage rates and soaring equity to contact their current lender or favorite loan officer to inquire about lowering their mortgage payment. Refinancing to a lower mortgage rate is the most popular reason to refinance a home mortgage, but here are 3 other reasons why a homeowner should consider refinancing their home loan even with the recent rise in mortgage rates.
Shorter Mortgage Term
Rates are so low it now may be the time to shorten your loan term from a traditional 30 year mortgage to a 15, 20 or 25 year loan term. Depending on your existing loan balance its possible that your mortgage payment may only be increased slightly, but this can be huge in interest savings over the life of the loan. 15 year mortgage rates are typically lower than a 30 year fixed rate mortgage. Additionally if paying off your home loan is a goal a 15 or 20 year loan makes it a lot more realistic.
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Remove Private Mortgage Insurance
If you put less than a 20 percent down payment when buying your home it's likely you pay (Private Mortgage Insurance) or PMI on top of your mortgage loan payment. If home values in your area have been increasing or you have been paying on your mortgage loan for over 5 years, removing your private mortgage insurance may be an option. If your home has 20% equity and you have a good payment record on your existing mortgage loan, you may qualify to remove your PMI when refinancing. Removing PMI can save hundreds of dollars on your mortgage payment alone even without lowering your interest rate.
Cash-Out Refinance
If you own a home with no mortgage or have substantial equity in your home, you may be able to get approved for a Cash-Out Refinance. A Cash-Out refinance is a great way to cash out some equity for home improvements, a pool or purchasing another property. Mortgage Lenders will limit the loan to value on a Cash-Out Refinance, but this is a great way to borrower money at a low fixed interest rate.
If you think you missed on on the Refinance boom, don't fret if your goal is to pay off your, mortgage sooner, remove mortgage insurance or take advantage of rising equity to consolidate some debts then it may not be too late.
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