Conditions aren't always ideal when a person decides to buy a home. Sometimes, it's the market that's bad. Interest rates are high, but a job change or some other life event necessitates a purchase. Other times, a person's credit is less than stellar, so they aren't offered the best terms for their mortgage loan. Thankfully, home refinancing services can get you a better deal. Here are four advantages to refinancing your home mortgage.
Your Monthly Payment Will Be Cheaper
The biggest advantage, of course, is your house payment will be less because the interest will be less. You can also opt to pay the same amount each month, but more will go to the principal. This means you will pay off your mortgage that much sooner, saving even more money on interest.
You Can Potentially Switch From An Adjustable Rate Mortgage To A Fixed Rate Mortgage
State laws and loan terms vary, but in most cases, you can refinance your adjustable rate mortgage (ARM) to a fixed mortgage. A fixed mortgage will take the fear of a varying payment away. Obviously, the best time to refinance is when the interest rates are low.
You May Be Able To Drop Your Private Mortgage Insurance
Depending on how long it has been since your first loan originated, you may have paid the principal down enough to no longer have to pay the private mortgage insurance when you refinance. In general, the PMI payment amount is 1 percent of the loan amount annually. This would be $100 every month on a $120,000 loan. Typically, once you have paid 20 percent of the principal, you will no longer be required to carry it.
Reduce The Term Of Your Mortgage
If you're like most people, your current loan is probably a 30-year mortgage. If you have been paying on it for several years already, you may be able to switch to a 15- or 20-year mortgage if you refinance. This will reduce the amount of interest you pay over the year substantially.
You'll also build equity faster. The more equity you have in your home, the more financial options you have. For example, if you need a new vehicle, you can borrow against the equity in your home, which will usually save you money versus a using a conventional auto loan.
Contact a home refinancing service, such as Tennessee Home Mortgage, today to see what your options are. Chances are that refinancing will be financially advantageous to you.