Simply put, a mortgage refinance is the replacement of an existing mortgage with a new mortgage under different terms. Mortgage refinancing can potentially lower your monthly payments and save a substantial amount of money each month and over the life of the loan. Alternatively, a refinance can be used to access the equity in your home to be used as part of your overall financial planning.
Reasons to consider a refinance: There are many reasons to consider a refinance. Here are a few of them.
- Lower your Interest Rate: Rates may have decreased since you started your current Reduce your interest rate from what you are currently paying which lowers the required monthly payment.
- Get away from Private Mortgage Insurance (PMI). Some loan programs require PMI until a person has substantial equity in their home. Private Mortgage Insurance is a type of insurance the protects the lender and is added to the monthly principal and interest payment. A refinance to a mortgage that doesn’t require PMI may be a smart move to lower your monthly mortgage payment.
- Your credit score has improved. If you have been working hard on improving your credit score since the time you closed on your current mortgage, you may now be in position to receive better loan terms than you currently pay.
- Debt Consolidation. Put the equity in your home to work for you. Access your equity to pay off high interest rate debt and put yourself in a solid financial position each month. Doing this may allow you to pay extra on your mortgage each month to pay it down faster, rather than paying a high interest rate to credit card companies.
- For Life. Access equity in your home to complete a remodel, for the down payment, to purchase an investment property or to buy your dream cabin at the beach. Your equity can also help fund college for your children or help them buy their first home.
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