When you consider whether or not to refinance your mortgage, it’s a good idea to start with a clear understanding of your financial goals as a homeowner. Are you looking to lower monthly expenses, access cash from your home equity for unexpected expenses, or be free and clear of your mortgage faster? When you understand your financial picture, you can weigh your options and choose the right path for you and your family.
Here are a few reasons that many people decide to refinance:
1. Lower your monthly payment
It’s likely that if your original mortgage closed prior to 2011, and you haven’t refinanced in the meantime, you are paying more on your mortgage than you should. Depending on your current interest rate, the balance owed, and credit history, it’s possible that refinancing could save hundreds of dollars on your monthly mortgage payment.
2. Reduce your interest paid
By refinancing to a shorter loan term, you will pay off your home sooner than you would with your current mortgage. That could set you up for financial success down the road and you could save significantly on interest by paying off your loan balance sooner so you pay less interest over the term of the loan.
3. Pay off your mortgage faster
Moving from a 30 year to a 15-year mortgage will help you own your home sooner. That can put you in a better financial situation down the road and, since shorter-term loans often have lower interest rates, you may save in interest in the long-term even if your mortgage payments are higher in the short term.
4. Access equity in your home
If you have enough equity in your home, you may be able to refinance and take out cash from the new loan. By refinancing your home with a larger loan amount, you can pay off your current mortgage and keep the difference. Then use that cash to pay off higher-interest debt, cover large expenses like college or a wedding, pay down credit card debt, or make home improvements so that you fall in love with your home all over again.
5. Drop the PMI
If you put less than 20% down on your original home loan, you’re probably paying for mortgage insurance. Plus, if you applied for an FHA loan on or before June 2013, you may continue to pay private mortgage insurance premiums (PMI) for the life of the loan. That means that even if you’ve reached 20% equity in your home, you may still be paying PMI. But, if you qualify for a conventional loan, you may be able to refinance without PMI – saving money every month for the rest of your loan term.
6. Change your mortgage type
Most adjustable-rate mortgages (ARMs) have an initial fixed-rate period and then the rate can adjust at specific intervals. If your ARM is coming to the end of your fixed-rate period, you may want to consider refinancing to a fixed-rate mortgage to avoid unpredictable monthly payments.
Here's a calculator that can you determine if refinancing your home can benefit you. Questions about whether refinancing your mortgage with NASB is a match made in heaven? Call us at 855-465-0753 and one of our experienced loan consultants will see how we can help meet your financial goals.