October 27th, 2017 7:34 AM by Jackie A. Graves, President
The era of historically low mortgage interest rates may be coming
to an end, but it doesn’t appear to be winding up anytime soon. As of this
writing, interest rates on a 30-year fixed mortgage have once again dropped to
4%, despite the Federal Reserve’s interest rate increases.
present an excellent opportunity to refinance your
home – but even if interest rates are rising, you may still
have a valid reason to refinance. Consider these five reasons why a refi may be
right for you regardless of economic conditions.
1. Lowering Your Payment – Having trouble
meeting your monthly payment? If you can acquire an interest rate that is
sufficiently lower than your current rate, you can lower your monthly
payment through refinancing. Online calculators can help you
determine the break-even point; the time at which the savings realized equals
all the costs associated with the mortgage.
how long you plan to stay in the home, as that can influence your decision. If
you are likely to sell the home before the break-even point, refinancing may
not be your best option.
you can’t get a better interest rate, you can still lower your payments with a
refi by extending your loan term. Since extending your loan term will cost you
more in interest over the life of the loan, you should only consider extending
terms in the context of a long-term financial plan. It’s not wise to focus on
lowering payments only to accumulate more debt in the future.
2. Improving Qualifications – How
good was your credit when you bought your home? It’s possible that your credit
has improved considerably since you acquired your mortgage – especially if you
have made all your mortgage payments on time and in full, and have shown
responsibility with other lines of credit. Because you’ve demonstrated lower
risk to a lender, you may qualify for a better interest rate through your sound
financial habits. You can check your credit score and read your credit report
for free within minutes using Credit Manager by
3. Switching to a Fixed Rate – Adjustable-rate mortgages are great in the
short term, but when the adjustment period kicks in, your rate could quickly
surpass the fixed rates of the day. Currently, interest rate changes have been
slow, but when interest rates are rising more rapidly, a timely refi can save
thousands of dollars in interest over the life of a loan.
4. Removing Private Mortgage Insurance (PMI) – Generally,
PMI is required with a down payment of less than 20%. In some cases, the
monthly PMI payment can be removed after you reach a certain equity level, but
if your loan does not allow PMI cancellation, consider refinancing as an
option. A slightly higher refinancing rate can still save you money in the long
run if you can remove a significant PMI payment in the process.
5. Cashing Out – A “cash-out” refinancing
essentially extends your borrowing to more than you owe on your home, with the
difference being available to you in cash. You can use that money for any
purpose, but you should have a good reason for going further into debt,
especially at a higher interest rate. One good reason may be to apply the cash
toward paying down a higher-interest debt such as credit cards. In that case,
you’ve traded longer-term lower interest mortgage debt for short-term high
just assume that refinancing is out of the question because interest rates are
rising. The value of refinancing is relative. Can you get a better interest
rate than the one you have now, or can you meet some other financial objective?
There’s no way to tell until you fully investigate your options – and a little
bit of research can save you a lot of money. MoneyTips is happy to help you get free refinance quotes from top lenders.
– To view the original article click here