Lower costs, adjustable rates, zero-down options: today there are a variety of reasons why home owners are refinancing and making traditional 15 or 30-year fixed rate mortgages a thing of the past. Here are five reasons why you might consider refinancing:
- Lower Monthly Payments: If you plan on residing in your home for the long-haul, refinancing to lower your monthly payments could be beneficial. However, if you intend to stay for the short term, evaluate whether you will be there long enough to cover refinancing costs. Before you decide, assess your break-even point to determine whether refinancing is financially viable at this time.
- Consistent Payment Amounts: When refinancing, adjustable versus fixed mortgage rates are important to consider. Adjustable rates often have lower initial monthly payments, but their interest rates can increase over time. Fixed rates, on the other hand, provide set monthly payment amounts – and a consistent payment plan with a fixed rate could benefit your financial planning.
- Escape a Balloon Payment: Balloon payment programs offer low initial monthly payments. However, at the end of your loan term, you will be responsible for the entire balance of your mortgage. This is not a mortgage product that I would recommend. If you currently have a balloon payment plan, you can easily refinance to an adjustable or fixed rate mortgage plan to ensure you can cover the cost of your entire loan in smaller amounts.
- End Private Mortgage Insurance: Zero or low-down mortgage payment options allow consumers to purchase a home with less than 20% down, but most of these programs also require private mortgage insurance to protect the lender from default. If you have made significant contributions to your loan balance, you may be eligible to remove this insurance from your payments by refinancing.
- Cash in on Home Equity: If your home's value has increased over the years, cashing in on home equity can serve as a great resource for additional cash. From paying off credit cards and student loan obligations to making that long-overdue home improvement, there are numerous ways you can benefit from cashing in on your home equity. Cashout mortgage refinance options are easy – and may even be tax deductible!