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Best Reasons to Refinance Your Mortgage

March 31, 2022

Reasons to Refinance Your Mortgage Graphic

Mortgage Refinancing Offers a Wide Variety of Benefits

Whether mortgage rates are at their lowest or a bit higher, there are several advantages to tapping into your home equity. From finally having those renovation projects done to paying off debt, let’s see why refinancing might be wise.

With Homestead, refinancing your mortgage is easy. As a direct lender, we handle your loan from application through closing. Because we have in-house processors and underwriters, and we fund our own loans – we can close a refinance in 30 days.

Refinance for Lower Interest Rates

One of the main reasons people refinance is to lower their interest rate. Your savings depend on your current rate. Besides lowering your interest, your payment should decrease too (unless you take cash out and increase your balance.)

Eliminate Mortgage Insurance

If you put less than 20 percent down when you bought your home, you probably have private mortgage insurance (PMI). Getting rid of PMI can save you $100 or more every month!

Do you currently have a conventional loan? If so, once you have 20 percent equity, ask your lender to remove the PMI. It will take an appraisal to verify the value of your home. If you have an FHA loan, the only way to remove the mortgage insurance premium (MIP) is to refinance into a conventional.

Tap into Your Home Equity

Man renovating a home after buying through Homestead Financial

What are home prices in your neighborhood? If you notice substantial price increases, now may be the time to think about a cash-out refi. If the value of your home has gone up, you might have more equity than you realized.

When you have equity in your home – the value is more than what you owe. In that case, it’s possible to pull cash out. When you refinance – you can take out a bigger loan, pay off your old one and get money in your pocket.

There are no legal restrictions on how you can spend the money from your cash-out refinance, but it’s good to have a plan for it before applying. A refinance can help you pay off high-interest credit card debt. Or you could use the funds for home improvements and build even more equity.

Debt Consolidation

If you’re looking for ways to streamline your efforts to pay off high-interest debt on credit cards or personal loans, a cash-out refinance could be the right move.

A cash-out refinance is a wise option to consider for debt consolidation mortgage refinancing. This type of refi loan allows you to make fixed payments over a set period instead of paying a monthly revolving credit card bill. Although cash-out refinancing does increase your mortgage by the amount of the other debt you are looking to pay off. But your mortgage interest rate is likely lower than those you’re currently paying on your other debts.

Switch to a Different Type of Loan

Borrowers might want to switch from an adjustable-rate mortgage (ARM) to a fixed loan, or a fixed to an adjustable depending on the rates. To learn more about an ARM, click here.  Talk to a Homestead loan officer and compare programs and rates to know about your options.

Will Mortgage Refinancing Save Enough Refinancing to Cover the Costs?

That is an important question to ask. Look at your loan costs. The main fees include:

  • Loan Origination Fee
  • Appraisal
  • Title & Recording Fees

 

Every lender has its fees, but these are the typical Homestead charges. You’ll also have taxes and insurance, but you’d have that anyway. So we won’t include that in the loan cost.

Get Pre-Approved Today

Thanks to Homestead, getting pre-approved has never been easier.

Our loan officers are always ready to help you refinance and achieve your goals. Contact Homestead today.

 

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