Many people wait until interest rates drop before they consider refinancing their homes. While a drop in interest rates will save the homeowner money, several other benefits come with making this move. The following are a few of these benefits.
Lower Monthly Payment
When a person refinances their mortgage to benefit from a lower interest rate, their monthly payment typically decreases. The money they save on interest can be used to pay down other debts or for another purpose. A person might want to use the additional funds to build up an emergency fund or to increase their retirement account. This varies by the borrower.
A dip in interest rates is often an ideal time to refinance. However, in addition to saving money, there are several other benefits that can come from replacing your old mortgage with a new one. Here are five benefits of refinancing your mortgage. When comparing lenders for a refinance, refinancing with a Christian lender should be an option.
Early Payoff
Some borrowers refinance their homes to reduce the loan term. For example, they may choose to move from a 30-year loan to a 15-year loan. If they have enough equity built up in the home, they may find refinancing at a lower rate allows them to make this move without significantly impacting their monthly mortgage payment. Less will be paid in interest over the life of the loan thanks to the lower interest rate.
A Fixed Rate
Some individuals opt to get an adjustable-rate mortgage from Space Coast Credit Union in Florida to secure the benefits that come with this lending option. However, they need to reassess their loan periodically and take advantage of a low fixed rate when one becomes available. Many borrowers choose to reassess their loans when they know an interest rate adjustment period is coming. However, it never hurts to do this assessment at other times as well.
Cash Out
A person builds equity in the home every month when they make their mortgage payment. In addition, a person may build equity in the home when property values increase. This equity may be pulled from the home when the owner refinances the mortgage. Many people choose to use this equity when they want to make home improvements or repairs because they know the money is going back into the asset.
The funds can be used for other purposes, however. For example, the borrower may use this equity to fund their child’s college or to pay off medical bills. It may also be used to pay off high-interest debt or other expenses.
Eliminate Private Mortgage Insurance
Mortgage lenders require borrowers to pay private mortgage insurance if they will be financing over 80 percent of the home’s value. When a person refinances the home, they may find they no longer need to purchase this insurance, as the loan value doesn’t meet this threshold. This may be due to the lower loan amount, an increased property value, or a combination of the two.
Each borrower must determine what they want from a lender. Are low fees the priority, or is a particular type of loan desired? Most lenders will consider a person’s credit score, but not all will. This may play a role in which mortgage lender is selected. Consider all factors when making this choice, as the right lender can improve the home-buying process in every way.