There is a silver lining in every dark cloud. That is especially true for individuals paying mortgages at a time like this, since interest rates are relatively low. The decline in interest rates implies you can refinance your home and enjoy better value for your money. Additionally, you do not have to refinance your home from your current lender because you have the freedom to approach a different mortgage lender for the same reason.Verify my mortgage eligibility (May 11th, 2021)
As such, you need to research before refinancing your home. That way, you can identify the lender who offers favorable terms. Here are several reasons why you should consider refinancing your home.
1. When You Want to Consolidate Your Debt
If you are currently servicing more than one loan, refinancing your home allows you to consolidate other debts into a single and affordable payment. Doing so will prove a worthwhile decision, especially if you have high-interest loans and debts like a second mortgage, credit card debt, or student loans. Refinancing your home works the same way as a cash-out refinance.
That means that the lender you opt for will turn a portion of your home equity into cash that you can use to pay off other debts and loans. As a result, your new mortgage will replace your old one, and the former will include the amount you take out to pay other debts. Additionally, moving your credit card debt to your mortgage can attract significant savings in the long term due to the low-interest rates available now.Verify my mortgage eligibility (May 11th, 2021)
Also, mortgage interest is tax-deductible, which is not the case with credit card interest, and that offers another chance for you to enjoy savings by consolidating.
2. The Need to Lower Your Monthly Payments
If you want to lower your monthly mortgage payments, refinancing your home when interest rates are lower is advisable. That suggests that you may pay less than you are paying now over the life of your mortgage. You can find out how much you will save on your monthly payments by checking the current interest rates.
On the other hand, if you anticipate a decrease in income and there is no drop in interest rates, refinancing your home can help you lengthen your loan term so you can pay it off without undue pressure, but this will be over an extended period. For instance, switching from a 15-year fixed-rate mortgage into a 30-year fixed-rate mortgage can reduce your monthly payments.Verify my mortgage eligibility (May 11th, 2021)
You can also consider refinancing your home when it’s value increases or after paying off a significant amount of your mortgage. That means that your loan-to-value ratio (LTV) will be smaller, which suggests that the lender will consider your loan a lower risk and that can attract a better rate.
Cancelling your mortgage insurance to lower your monthly payments is also possible once you pass the 20% mark for equity in your home if you are currently paying for private mortgage insurance.
3. If You Want to Take Cash Out
You can use the equity you build in your home to borrow money by doing a cash-out refinance. In turn, you can reinvest the cash out back into your home on such things like repairs and renovations, which will boost the value of your home. Also, if you need money for expenses like medical and education costs, and you do not have access to other funds, taking cash out can be a viable option.
Defining your goals should be the first step if you are planning to refinance your home. The reason is that comparing rates and estimates will not be a problem when you have insight into the refinance option that fits your needs. You can apply for a mortgage online and if you need more information on reasons for refinancing your home, contact us today!