Reasons to Refinance













Here are a few good reasons to refinance:


1. Take cash out to consolidate your debt.  Accessing the equity in your home is one of the smartest ways you can make your money can work for you. Use the cash from your home to pay off higher interest, non tax-deductible credit cards, student loans, or medical bills. By consolidating your debts, you can enjoy the benefit of having only one payment each month, and in most cases your overall monthly outflow decreases



2. Lower your rate and payment.  This is one of the most common reasons that homeowners refinance. If your current interest rate is higher than what is currently available in the market, it is probably a good idea to see how much you could save by refinancing. There are no-cost and low-cost options that could save you money.


3. Take cash out for home improvements.  What better way to use your hard earned equity than to invest it back into your home with repairs or home improvements? Whether you would like to fix your leaky roof or update your kitchen, you can tap into your home's equity and have a tax deductible* way to tackle your projects. *consult with your tax advisor


4. Remove mortgage insurance.  If you purchased your home with less than 20% down, chances are you're paying private mortgage insurance (PMI). Refinancing will help you eliminate the extra expense if you've paid down your loan balance and/or have seen an increase in your home's value to a point where you have at least 20% equity in your home, or a loan-to-value (LTV) of 80% or less.


5. You need to remove a name from the mortgage. If you get a divorce or split ways with a co-borrower, refinancing is the only way to remove a person’s name from the mortgage loan. Understand, however, that in order for you to keep the mortgage in your name only, you’ll have to qualify for the mortgage on your own. This means having a high enough credit score to get a mortgage by yourself, as well as the income to make home loan payments on your own.


6. Convert your 30 year loan to a shorter-term loan. Take advantage of low rates to reduce the term of your loan.  Shorter terms mean lower rates.  Sometimes plans change and the home (and loan) that you thought you were going to have for a while turns from a permanent situation into a temporary one. If you are planning to sell your home sooner than you thought and no longer need a long-term rate, then you may consider converting your 30 year fixed to either a 15 year fixed, a 3/1, 5/1, or 7/1 ARM loan program, which often have lower rates and payments


7. Convert your interest-only loan into a fully-amortized loan.  Like ARMs, interest-only loans are a great way to minimize your mortgage payments at the beginning; however, because you are not paying any principal, your loan balance does not decrease. If you plan to keep your home long term, you probably want to start paying off your loan. Often, you can refinance your interest-only loan to a 30 year fixed rate loan while keeping your payments about the same.

8. Convert your adjustable rate into a fixed rate.  Adjustable rate mortgage (ARM) loans are a great way to ease into your mortgage payments, especially if you were a first time home buyer or if you needed lower payments initially. Eventually, if you decide you will stay in your home longer, you may want to consider refinancing that adjustable into a long term fixed rate loan. Doing so will give you peace of mind, knowing that your rate and payment will not change for a set period of time.