Have you thought about refinancing but didn’t know if it made sense? Or you just didn’t know where to start?
Don’t leave money on the table! First, figure out your goals for refinancing so you can find the best option to ultimately save you time and money.
The most popular reason to refinance: The #1 reason people refinance is to lock in a lower interest rate. Why? This can potentially save you hundreds to thousands off your total loan payment!
But you may not realize there are other great reasons. Here’s the top three that every homeowner should know:
1. Removing Private Mortgage Insurance (PMI).
House values have risen dramatically over the past few years. If your original down payment was less than 20%, you’re probably paying PMI. Your home could now have enough equity to refinance and remove your monthly PMI payments which could save you a lot of money! The appraisal for your refinance loan will serve as validation of the current value—and if your loan amount is 80% or less of the current appraised value, PMI should be dropped.
2. Reducing your loan term from a 30-year to a 15-year.
If you’re looking to change your loan term from a 30-year to a 15-year loan, you’ll pay less interest over time which ultimately allows you to save money and build wealth. This is a great option for homeowners looking toward debt-free homeownership.
3. Switching your loan type.
- Moving from an FHA to a Conventional Loan: If you’re a first-time homeowner your current mortgage may be with the FHA. Paying premiums for mortgage insurance and other costs are common with this type of loan. As home values continue to rise, it may be a good time for you to look at switching from your FHA loan to a conventional loan program.
- Moving from an ARM to a Conventional Loan: If you currently have an Adjustable Rate Mortgage (ARM) or other loan type and you’re looking to switch to a fixed-rate loan, a conventional loan might also be right for you. With this type of loan program, you may be able to take advantage of other refinancing options to assist you with renovations or upgrades to build additional equity in your home.
Just remember to align your mortgage with your goals. It’s important to see if you can benefit from one of these refinancing reasons. Refinancing can be a vital step in paying off your loan early and ultimately becoming debt-free.