Why Refinance Your Mortgage?
When you refinance your mortgage it replaces your current mortgage loan with a new one. People refinance for many reasons. Some people refinance their mortgage to reduce the interest rate and save money, reduce their monthly payments or perhaps consolidate credit card debt. By cashing in on your home’s equity, one can stay ahead of financial goals. You might choose to refinance your home as a means to pay off your home loan faster. Another reason to refinance your mortgage might be to switch from an adjustable-rate mortgage to a fixed-rate loan.
As you can see, there are many beneficial reasons to refinance your mortgage. Read on to learn more about why and how to refinance your mortgage.
Why and How to Refinance Your Mortgage
Before you even consider refinancing your mortgage, think about why you want to do this. Your reasoning for refinancing your mortgage will make the entire process faster and easier when working with a lender.
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- Reduce your monthly payment. If your goal is to pay less every month then, refinance into a new loan with lower mortgage rates. You can reduce your monthly payment by extending the term of your new loan. You can decide on 15, 20, 25 or 30 years. The only concern for many people choosing longer loan periods is the overall cost of the loan. In other words, the longer your loan term is, the more interest you will have to pay over time.
- Cash in on the equity in your home. If your goal to refinance is to borrow more money than your current home loan amount and closing costs, the lender will give you a check for the difference. This is called a cash-out refinance.
- Pay off your mortgage faster. If your goal is to refinance from a 30-year mortgage to a 15-year home loan then, you’ll be able to pay off your loan in less time paying less interest. A huge downside to changing from a 30 year to 15 year loan term is that your monthly mortgage payments typically go up – sometimes by a lot.
- Eliminate mortgage insurance. Private mortgage insurance on conventional home loans may be canceled when the loan reaches 78% based on your original home value. But, for some loans, reaching 78% is many years away. So, refinancing to remove mortgage insurance is often a good idea. On some Federal Housing Administration loans, monthly mortgage insurance can’t be cancelled until the loan is paid in full. As a result paying off FHA loans to remove mortgage insurance is very often a good idea.
- Switch from adjustable-rate mortgage to a fixed-rate mortgage. The downside with adjustable-rate mortgages is that they can go up during your loan term. On the other hand, fixed-rate loans stay the same over time. If your goal in refinancing is to switch from an adjustable-rate mortgage to a fixed-rate loan you will gain much more financial stability with steady payments.
How To Refinance Your Mortgage With HomePromise
- Decide on your goal. Remember, your goal may be to reduce your monthly payments, shorten the life of your loan term or eliminate your FHA mortgage insurance.
- Apply with HomePromise. Quickly and easily apply online with us and submit all applications as directed by our refinance experts to avoid changes in your credit score.
- Close your new loan with us. We work hard to make your closing process easy and stress free. You’ll receive a detailed Closing Disclosure showing you all the costs of your mortgage.