Did you know that refinancing your home can save you more money than you think? With the average refinance rate at an all-time low, many homeowners save thousands of dollars in interest payments. There are many home mortgage refinancing solutions, and we’re going to discuss ways on how refinancing your home can help you save money and get out from under a heavy debt load.
Lower Your Interest Rate
One of the biggest benefits of refinancing your home is that you can lower your interest rate. Lowering your interest rates means saving money on every monthly payment, which will add up to significant savings over time. For example, if you have an average mortgage balance of $150k and pay around $1100/month in interest payments, you can lower your rate to around ~$800/month and save $300 every month. That’s an extra $3600 per year that you’re saving.
Get Rid of PMI
Private Mortgage Insurance (PMI) protects the lender if you default on your loan. If you keep making monthly payments, then after a period of time, usually around two years for conventional loans and five years for FHA loans, your LTV ratio will increase to 80%, which means that you no longer have at that point to pay PMI.
Access to the Home Affordable Refinance Program (HARP)
When you refinance your home, you are in complete control of the terms and conditions. However, there may be times when a new deal comes along that could save you even more money than what is available on today’s market. This doesn’t only apply if there is an interest rate reduction, but if you’re refinancing from one product to another.
Improve Your Credit Score
Refinancing your home will also improve your credit score. A lower interest rate and a reduced mortgage balance mean that you are spending less each month on loans and lowering the amount owed on your home, which helps to increase your equity. As these factors contribute to an improved credit score, refinancing can potentially save you more money in the long run.
Cash Out Equity
Refinancing your home can provide you with cash in hand. If you have built up equity over the years, refinancing allows you to access that money and put it towards something else like debt consolidation or investment property. This is also known as a “cash-out” refinance, where the new loan value is equal to or greater than the value of your home.
When it comes to refinancing your home, there is a lot of information out there. To learn more about the benefits and how you can save money by refinancing today, contact a professional for help with financing or any other questions that you may have.
Lower Your Interest Rate
One of the biggest benefits of refinancing your home is that you can lower your interest rate. Lowering your interest rates means saving money on every monthly payment, which will add up to significant savings over time. For example, if you have an average mortgage balance of $150k and pay around $1100/month in interest payments, you can lower your rate to around ~$800/month and save $300 every month. That’s an extra $3600 per year that you’re saving.
Get Rid of PMI
Private Mortgage Insurance (PMI) protects the lender if you default on your loan. If you keep making monthly payments, then after a period of time, usually around two years for conventional loans and five years for FHA loans, your LTV ratio will increase to 80%, which means that you no longer have at that point to pay PMI.
Access to the Home Affordable Refinance Program (HARP)
When you refinance your home, you are in complete control of the terms and conditions. However, there may be times when a new deal comes along that could save you even more money than what is available on today’s market. This doesn’t only apply if there is an interest rate reduction, but if you’re refinancing from one product to another.
Improve Your Credit Score
Refinancing your home will also improve your credit score. A lower interest rate and a reduced mortgage balance mean that you are spending less each month on loans and lowering the amount owed on your home, which helps to increase your equity. As these factors contribute to an improved credit score, refinancing can potentially save you more money in the long run.
Cash Out Equity
Refinancing your home can provide you with cash in hand. If you have built up equity over the years, refinancing allows you to access that money and put it towards something else like debt consolidation or investment property. This is also known as a “cash-out” refinance, where the new loan value is equal to or greater than the value of your home.
When it comes to refinancing your home, there is a lot of information out there. To learn more about the benefits and how you can save money by refinancing today, contact a professional for help with financing or any other questions that you may have.
Lizzie Weakley is a freelance writer from Columbus, Ohio. In her free time, she enjoys the outdoors and walks in the park with her husky, Snowball.