Refinancing is more than just an opportunity to get a new mortgage rate and monthly payment. Here are a few other reasons you may want to consider refinancing your home loan:
You have an ARM. When you purchased your home, you took out an adjustable-rate mortgage. But you plan on staying in your home over the long term and want the predictability of a fixed-rate home loan. Refinancing can help you accomplish that goal.
You have mortgage insurance. Generally, private mortgage insurance is required with a down payment of less than 20 percent. In some cases, though, if you have increased your home equity past the 20 percent mark, refinancing can help get you into a new loan without a monthly mortgage insurance premium. It all depends on your home value as determined by an appraisal and your outstanding mortgage balance.
You want to tap your home’s equity. Depending on the amount of equity you have in your home, you may be able to ‘cash-out’ of some of your equity during the refinancing process. It’s important to be thoughtful about how and when you use the equity on your home.
Of course, for many people, refinancing means a lower mortgage rate and a new, lower monthly payment. If today’s mortgage rates are different than when you purchased your home, refinancing can help you cut your family’s monthly expenses. It’s estimated that there are millions of homeowners with higher-rate mortgages who could save money on refinancing.