Benefits of Refinancing
Not excited about paying your mortgage for the next 30 years of your life? Refinancing can help you shorten the term of your loan, so you pay off your mortgage faster. This can be beneficial if you know you’ll be leaving the property sooner than your loan is paid off, or if you simply want to eliminate a monthly financial obligation.
More Cash in Your Pockets
If you’re in need of some extra cash to cover credit card balances, college tuition, home renovations or other household expenses, a refinance can help you get it. Through a cash-out refinance or a home equity line of credit (HELOC), you can leverage the equity in your home for cash, essentially taking out a low-interest line of credit against the stake you have in your home. Use the cash however you wish and pay it back month over month, just like you would a mortgage.
No More PMI
If you’re paying Private Mortgage Insurance on your FHA-backed loan, you may want to consider refinancing to a conventional loan, which would allow you to cancel PMI and save money on a monthly basis and over the life of the loan. Make sure you know how much equity you have in your home first, though; if you’re nearing the 20 percent mark, you may want to simply wait and cancel your PMI policy when your lender allows it.
A More Predictable Payment
For homeowners with an adjustable rate mortgage, refinancing to a fixed rate loan can bring more consistency and predictability to the repayment process. Refinancing out of an ARM is particularly beneficial once the initial lock-in period has passed, and the loan’s interest rates have started to fluctuate or increase.