Refinancing your house can be a great way to save money on your monthly mortgage payments, get rid of private mortgage insurance (PMI), and do away with the need for home equity lines of credit. If you’re considering refinancing your house, several smart benefits come along with it.
1. Lower Monthly Payments
Refinancing your home with the help of a refinance company, like Milestone Mortgage, can allow you to lower monthly mortgage payments. Refinancing is also known as loan “consolidation” because it combines several types of loans into one larger loan, with just one monthly payment. And when you get your new loan through a refinance company, you lower your monthly payments even further.
2. You’ll Get A Better Interest Rate
Refinancing your home can also allow you to get a much better interest rate, which means that you might end up paying less interest over the lifetime of your loan. For example, if you have an adjustable-rate mortgage (ARM) with a low introductory rate and then rates go higher, refinancing can allow you to get a new loan at a lower rate than what the original one set out. Whether your new or old home has equity or not, refinancing can help give you more control over your monthly payments and be another way to save money in the long term.
By consolidating all of your loans into one larger loan and lowering interest rates and monthly payment amounts, you could end up paying off the entirety of your home much quicker. Some people who refinance even find that they’ve saved enough money from their monthly budget to pay back their mortgages years ahead of schedule.
3. Do Away With PMI
One of the biggest benefits of refinancing your home is that it allows you to do away with private mortgage insurance (PMI). Private mortgage insurance protects the lender if you should default on your home loan, which means they are covered in case you run into financial difficulty and stop making monthly payments on your house. This sounds in theory but it’s not a positive thing. If you can’t make payments and default on your mortgage, it means that there’s a chance you might lose the house in foreclosure. While this is not the end of the world in most cases, it makes refinancing worth it in terms of avoiding PMI charges because its costs over time could add up to quite a bit.
4. Get Out Of Mortgage Debt Sooner
When you refinance your home, you might be able to get out of debt sooner which will help you avoid any possible financial difficulties or situations where you might need to rely on credit cards for emergencies or everyday expenses like food and gasoline. By getting out early from mortgage debt – before things get tough and before interest rates rise significantly – you’ll be better able to avoid any future debt problems down the road.
Refinancing your home can be a smart decision for anyone looking for financial benefits, but keep in mind that refinancing is not always the best route to take. Sometimes existing loans allow you to transfer current interest rates onto new loans, which could make it worth staying put. Make sure to do your research before making any financial decisions, and only make a decision when you find the right refinancing company with great rates and terms.