Some people buy a home and make the monthly mortgage payments without ever giving a thought to refinancing. At MortgageDepot, a mortgage broker company, we’re committed to helping our clients get the best deal possible when refinancing an existing mortgage, but we understand that some people might be hesitant. That is why we’ve put together a list of some of the reasons why people refinance their mortgages.
Some of the reasons listed below might not apply to your particular situation, but we believe you will find a few things on our list to make you want more information about refinance programs. All you have to do is visit our website at MortgageDepot or call us at (800) 220-LOAN to speak to one of our knowledgeable loan officers.
Get a lower interest rate
Changes in the economy cause interest rates to rise and fall, including the interest rates on mortgages. Homeowners should periodically check their mortgage documents to see how the interest rate on their loan compares to what is currently being offered on a refinance.
We routinely assist borrowers with rate- and term-refinancing. Refinancing a 30-year mortgage to a 15-year loan allows a borrower to obtain the lower interest rate usually associated with shorter term mortgages. It also means the mortgage will be paid off sooner.
Eliminate high-interest credit card debt
MortgageDepot loan officers frequently receive calls from homeowners looking to refinance their mortgage loans because they just realized how much their debt from credit cards or unsecured personal loans was costing them. Many of our borrowers come to us for relief from monthly debt payments that primarily go toward interest with only small portion going toward payment of principal.
One of our cash-out refinance loans gives a borrower the money needed to pay off high-interest debt. The savings for a borrower can be substantial.
Get rid of mortgage insurance premiums
FHA mortgages offer borrowers short on cash to put down to borrow a higher percentage of the value of the home, but the catch is paying mortgage insurance for the remainder of the term of the loan. Instead of keeping an FHA loan and paying mortgage insurance, let us take a look at your current financial situation.
A combination of making monthly mortgage payments to reduce principal and an overall increase in home values due to market conditions could produce an increase in the owner’s equity in the property. Refinancing an FHA loan into a conventional mortgage without mortgage insurance could reduce a person’s monthly payment.
Many homeowners who do not have FHA loans may be paying each month for private mortgage insurance required by their lender because they borrowed more than 80 percent of the value of the property. A refinance that takes advantage of the increased equity built up through reduction of principal and an increase in a home’s market value can eliminate PMI.
Take advantage of improved credit scores
A borrower’s credit history and credit scores affect the interest rate offered by lenders. If you worked to clean up your credit history, we can take your new credit scores and use them to lower your interest rate through a refinance.
Shorten the term of the loan
Many people looking to purchase a home would love to be in a position to pay off their mortgage in 15 years, but they do not have the income required to make a larger payment each month and must settle for a 30-year loan. As years go by and their income increases or they pay off other financial obligations, homeowners should contact MortgageDepot about refinancing from a 30-year mortgage to one that will be paid off in 15 years. Another advantage of a 15-year loan is that it usually comes with a lower rate of interest than mortgages payable over longer terms.
Lengthen the term of the loan
A homeowner who changed careers and now makes less money or who took on additional financial obligations after closing on the purchase of a home might be struggling with the higher monthly payments of a 15-year mortgage. If a 30-year mortgage makes more sense based upon your current financial situation, we can help you to refinance and enjoy the benefit of lower monthly payments by extending the term of the loan.
Eliminate the uncertainty of an adjustable-rate mortgage
An adjustable-rate mortgage with a below-market introductory interest rate may have been a good option when buying a home, but it comes with uncertainty about what monthly payments will be once the introductory rate expires. A refinance into a fixed-rate mortgage eliminates the uncertainty of being tied to fluctuating interest rates.
Take advantage of low, introductory ARM interest rates
It may make sense to give up a fixed-rate mortgage to take advantage of incentives offered by lenders to encourage people to refinance. Homeowners with ARMs whose introductory rates have expired can refinance into a new ARM with a new introductory rate.
Ready access to working capital
There are many reasons to consider refinancing an existing mortgage to tap into the equity in a home, including:
- Making repairs or doing improvements on the house.
- Investing in a new or existing business venture.
- Paying college tuition for children.
- Purchasing a vacation getaway.
It does not make sense to take out a personal loan when there is equity available to access by refinancing.
Dealing with a divorce
When a couple divorces, the option for one of the parties to purchase the marital home can be facilitated through refinancing. A buyout refinance may also arise in situations other than divorces, such as when partners in an investment property decide to end their business relationship. Refinancing to buyout a co-owner or a spouse may also be an opportunity to lower the interest rate or shorten the term of the loan.
Contact us today
No matter what reason you have for refinancing the mortgage on your home, we can help with trusted, expert advice. Our loan officers stand ready to put their years of mortgage industry experience to the task of helping you to find a mortgage product that meets your refinancing goals.