6 Reasons Why You Should Refinance
Author:
Community Mentor
If you’re thinking “Should I refinance my house?”, check out the 6 reasons as to why you may take such a decision.
- You want to save more:
Your monthly payments will be reduced if you get a low rate or when your loan term is extended. However, with an extended term, your monthly savings will increase but you’ll be paying more in total interest for the life of the loan. - You want to pay down your mortgage quickly:
You can shorten the length of your mortgage by reducing the loan term. Monthly payments will no doubt go up, but you will be able to save more in the overall interest payment. Moreover, you’ll be debt free in a shorter time. - You need extra cash to pay off credit cards:
If you have enough home equity, you can borrow more than the current loan balance. With the extra cash, you can pay off high interest debts such as credit card balances or installment loans. You gain out of it as the interest on such debt is not deductible unlike mortgage interest. - You wish to consolidate 2 loans into one:
If there’s enough equity (due to high appreciation), you can consolidate first and 2nd mortgages and refinance into a single first mortgage. The monthly payment on the new loan is likely to be lower than the combined payments on the first loan and the second mortgage. - You want to convert an ARM into FRM:
This allows you to lock in at a low rate. You can thus repay the loan with stable monthly payments rather than variable payments over the loan term. - You want to get rid off PMI:
If your current loan balance is below 80% of the new appraised home value, you can go for a home refinance and stop paying the PMI.