Many homeowners have taken advantage of the benefits of FHA loans when buying their homes. FHA loans are less risky for mortgage lenders because they are supported by the Federal Housing Administration. As a result, they have a low down payment requirement and low interest rates. However, they also come with a private mortgage insurance payment. This is a regular fee that is added to the mortgage payment each month. While an FHA loan’s benefits are attractive for homebuyers, refinancing your FHA loan with a conventional loan has several advantages.
If you have paid down the balance of your current FHA loan sufficiently to apply for an 80 percent loan-to-value conventional loan or for a lower LTV, your new loan will not have a PMI requirement. This results in regular monthly savings and in substantial savings over the loan’s life.
A Lower Interest Rate
The interest rate that you qualify for today could potentially be better than your current FHA loan terms. This may be because of a lower loan-to-value, market changes in interest rates and improvements to your credit score and other personal financial factors.
A Shorter Loan Term
When you refinance any mortgage, you have the option to choose a different loan term. By choosing a shorter loan term today, you may pay off your mortgage years sooner than you otherwise would.
With sufficient equity in your home, you could refinance with a conventional loan to draw some of that equity out. It could be used for investments, personal debt reduction, a startup or many other beneficial uses.
While these are substantial and realistic benefits of refinancing your FHA home loan with a conventional loan, keep in mind that the actual benefits will vary from applicant to applicant. For assistance determining if a refinance makes financial sense for your situation, contact a loan representative at MortgageDepot today.
Contact one of our loan consultants to learn more.