Are you considering refinancing your property? You aren’t alone. The Mortgage Bankers Association reports that 62.4% of all mortgage applications were to refinance existing properties in December 2019. There are a number of benefits to refinancing a mortgage. Some of the most important are listed below:
One of the most common reasons homeowners refinance is to save money by securing lower mortgage rates or lower terms on their mortgage. Interest rates change frequently, so homeowners can often save money by refinancing when APRs drop. As an added benefit, refinancing to a lower rate could also reduce private mortgage insurance premiums.
Cost savings on refinancing are directly proportional to the amount of the principal balance. A consumer that purchased a $300,000 home with a 20% down payment would have a $240,000 principal balance at the onset of the loan. If they immediately refinanced to a rate 1.5% lower than their current contract, then they could save $3,600 a year. This averages out to be $200 less per month.
You might need a home equity loan, but feel intimidated by the high interest rates you are paying on your current mortgage. This could be another great reason to refinance at a lower rate. When you choose to refinance your mortgage at a lower rate, you will effectively be paying a lower interest rate on your home equity loan.
The IRS is imposing more underpayment penalties on taxpayers than ever. The most recent figures show that 10 million people are billed for underpayments every year. State and local tax authorities also place a burden on citizens that fall behind on their tax payments.
Interest rates and penalties on tax underpayments can be substantial. You can often save money by taking out a home equity loan to pay them off. Your mortgage interest rate will usually be lower than the rate charged by the IRS or your local tax authority. The opportunity cost of restructuring your debt with a mortgage refinance will be lower if you refinance your property at a lower interest-rate.
PMI payments can be a burden to many homeowners. You might not have to pay PMI anymore if you reduce the principal balance to 80% of the property value. Refinancing your mortgage can help to expedite the time it takes for the removal of PMI. Refinancing your mortgage loan from FHA to Conventional can also have MI benefits.
Do you have more than one lien on your property? You might be able to consolidate them by refinancing two mortgage loans into one mortgage loan. Do this can reduce your monthly mortgage payment and lower your interest rate.
Dividing property is one of the biggest headaches during a divorce. If one spouse gets to keep the property, then they will have to buy out the equity of the other. Refinancing is usually necessary under the divorce decree.
There are many reasons homeowners choose to refinance their mortgages. It is important to work with the right mortgage company to get the best possible rates. Check current mortgage rates, or request a loan summary without impacting your credit. Contact Us to learn more about your refinancing options!
Refinance options such as an IRRRL or a Non-Credit Qualifying Streamline do not require an appraisal. However, it is highly likely that a traditional Fannie Mae or Freddie Mac refinance will allow for an appraisal waiver. Save yourself over $500 by asking your licensed loan officer how you can increase your chances for an appraisal waiver.