Are you wondering whether or not you should refinance? Many Karla Dennis And Associates, Inc.™ clients ask me this question all the time. So, let’s look at the benefits and then you can talk with the gentleman to your left, Mark Latini.
Lower Your Monthly Payment
A mortgage refinance can reduce your monthly payments. For instance, a refinance could extend the term of the loan from 15 years to 30 years, which would reduce monthly payments. For example, the monthly payments of a $200,000 mortgage with a 7 percent interest rate would drop from about $1,792 to $1,329 by changing from a 15-year loan to a 30-year loan.
Lower interest payments-
If interest rates have dropped since you bought your mortgage, you may be able to refinance it to a lower interest rate. This can save you a lot of money. For example, if you reduce the interest rate of a 30-year $200,000 mortgage by just 1 percent–for instance, from 6 percent to 5 percent–you can save over $45,000 in interest payments.
Move from an adjustable rate to a fixed rate
ARMs offer low introductory rates, but they also offer long periods of uncertainty that make it hard to budget. It makes sense in a mortgage refinance to go from an ARM to a fixed-rate loan during a low-interest rate environment. You’ll get emotional security and your rate won’t fluctuate with changing economic conditions.
If you are in a position to make a higher than normal payment on your mortgage, then you might want to consider switching from a 30 year mortgage to a 15 or 20 year mortgage. This would allow you to build equity faster and save more money on the financing fees. In other words, you would be building equity at a faster rate without putting out substantial amounts of money every month.
Managing Your Credit
If your credit score has gotten better because mortgage payments have been on time, you may be able to take advantage of that improved credit by refinancing into a loan with decreased payments.
Tapping equity and consolidating debt
Consolidating debt is another great way to help your credit score. You can use a cash out refinance loan to tap into the equity that has been build up in the home. You can choose to consolidate debt and pay it off, make home improvements, use it to make a big purchase such as purchasing a car or use it for your child’s tuition.
There are also some tax benefits when you refinance, which we can certainly discuss at a later date.
These are only a few benefits of refinancing your mortgage. For more benefits and information, contact Mark Latini at Divita Home Finance at (949) 279-5595 or via email [email protected]. We have worked with Divita for many years they are our go-to for any home finance matter.