5 Ways Refinancing Your Mortgage Can Save You Money
One of the best reasons to refinance your mortgage is to save money. There isn’t any reason you should be paying more for your mortgage than necessary. That’s is why looking at the options for refinancing your mortgage is a smart idea.
Your finances change over time, and the mortgage terms that were available when you purchased your home may not be serving your current needs.
Let’s examine 5 top reasons for refinancing your mortgage and how it can save you money:
1. Lower Interest Rate
Why should I refinance to a lower interest rate?
Lowering your interest rate lowers the amount of money you pay each month and the total amount of interest you will pay over the term of the loan. Refinancing to a lower interest rate means paying less interest on your mortgage.
How can refinancing to a lower interest rate save me money?
Interest is the primary way that banks earn money by lending you the funds on your mortgage. When your mortgage has a lower interest rate, you are getting a better deal. Paying less interest on your mortgage is one of the best ways to save money on your mortgage.
2. Faster Payoff Term
Why should I refinance to a shorter loan term?
Conventional mortgages most often have 15, 20, or 30 year payoff terms. The longer your payoff term is, the lower your monthly payment is going to be. However, a longer payoff term also means that you will be paying interest on the borrowed amount for longer.
How can refinancing to a shorter loan term save me money?
When you refinance from a 30 year mortgage to a 15 year mortgage, you will pay less total interest over the term of the mortgage. 15 year mortgages also often come with a lower interest rate. With a lower interest rate and a shorter payoff term, you can potentially save thousands over the life of the loan by refinancing.
3. Lower Monthly Mortgage Payment
Why should I refinance to a lower monthly mortgage payment rate?
If your financial needs change during your mortgage payoff term, you can consider refinancing to a lower monthly mortgage payment. This may be beneficial in giving your cash flow more flexibility.
How can refinancing to a lower monthly mortgage payment save me money?
By refinancing to a lower monthly mortgage payment, you can potentially free up some room in your monthly budget. Although refinancing to a lower monthly payment is not likely to save you money over the life of the loan, it can help make your mortgage payments more affordable.
4. Dropping Mortgage Insurance
Why should I refinance to drop my mortgage insurance rate?
Mortgage insurance is required on different mortgage programs if the loan to value ratio is greater than 80%. Mortgage insurance protects you and the bank in the event that you may not be able to make a payment. However, mortgage insurance can cost $2,200 per year on average.
How can dropping mortgage insurance premiums save me money?
Once your mortgage is eligible to drop the mortgage insurance, refinancing to a loan without MI can save you thousands over the life of the loan.
5. Access Your Home Equity
Why should I refinance to use cash from my home’s equity?
Many home owners use the equity in their home to pay off higher interest debt. You could also use cash from your home equity to invest in higher education or home improvements. Read about smart ways to use your home equity in this linked article.
How can a cash out refinance save me money?
Credit cards, personal loans, and other types of higher interest debt can be paid off with your home’s equity. This allows you to consolidate your debt into a lower interest mortgage. You will save money on interest by utilizing lower interest financing options.
Do you think it’s time to refinance to a better mortgage? Reviewing your options is a smart place to being.
We would love to help you take a look at the numbers and see if refinancing your mortgage can save you money. It is FREE to call and speak with one of our licensed mortgage consultants about your mortgage goals.