Refinancing your home can be very beneficial, but each person is different and will have their own reasons for refinancing.
Here are some reasons why you may consider refinancing your home:
Reason #1: Lower your Interest Rate
Lowering your interest rate can lower your payment, reduce the amount of money that you are paying towards interest, and can allow you to pay more money towards the principal loan amount, paying off the loan sooner.
Reason #2: Shorten the Term of your Loan
When you lower your interest rate, sometimes you may opt to shorten the length of your loan. This allows you to pay off your loan sooner.
Reason #3: Pull Cash Out
There are a few different reasons you may want to consider pulling cash out of your gained equity. This can be for home renovations, large purchases like a car or to finance a second home, consolidating debt, or for a financial emergency.
Reason #4: Remove Mortgage Insurance
You may want to refinance your FHA loan to a Conventional loan to remove mortgage insurance. FHA mortgage insurance can be very high and remains for the life of the loan. A conventional loan offers more flexibility and allows you to remove your mortgage insurance when you have reached 78% loan-to-value.
When you are currently in a conventional loan, you can refinance your mortgage at 80% loan-to-value instead of having to wait until you reach 78% loan-to-value, oftentimes saving you up to a couple hundred dollars a month.
Reason #5: Convert from an ARM to a Fixed Rate Mortgage
An ARM is where your interest rate changes over the life of the loan, often with a low starting interest rate that increases in variables over the life of the loan. You may consider changing to a fixed rate mortgage where the interest rate is “fixed” for the life of the loan. You never have to worry about your payment changing.