Mortgage rates are still at historic lows, which is good news for many homeowners looking to refinance. This can benefit borrowers in many ways, such as lowering monthly payments or shortening a mortgage’s term to pay it off sooner, just to name two. Just like when applying for a mortgage to purchase a home, refinancing requires the submission of financial, employment and credit documentation, and also requires closing costs. Still, many homeowners see the benefits of refinancing, and how it can help them reach their financial goals.
If you are still wondering if refinancing is a good option for you, or trying to understand when is the “right” time, please read our top five benefits of refinancing your home:
- Reduce the monthly payment
This is the most common reason homeowners are looking to refinance, and we understand why! By refinancing at a lower interest rate than that of the original mortgage, monthly payments can reduce by a significant amount, saving a homeowner money in the long run.
- Pay off a mortgage faster
Some homeowners opt to refinance their home with a shorter term. This results in fewer monthly payments overall, so the mortgage is paid off sooner. While refinancing from a 30-year mortgage to a 15-year mortgage may result in higher monthly payments, it will also help a homeowner build equity in their property faster, and the shorter term will save money by reducing total interest paid over time.
- Make upgrades to a home
Did you know you can refinance to restore your home? A renovation loan gives homeowners a convenient, economical way to make renovations or repairs, and increase the value in their home through improvements, all in one loan with one monthly payment. This refinance option is available to borrowers of all income levels, on almost any type of property.
- Cash out some equity
When paying a mortgage, the first few years of payments go more towards the interest than paying down the principal. However over time, the mortgage payments will be directed more and more toward reducing the principal amount borrowed, thus building equity. Some homeowners choose to refinance and “cash out” this equity to pay for unforeseen financial needs.
- Reduce or remove mortgage insurance
Most homeowners, unless they put down a large deposit when purchasing their home, pay a monthly mortgage insurance. This is on top of their regular principal and interest paid. But for homeowners who have paid down a significant portion of their balance owed, refinancing can allow them to reduce or entirely remove their monthly mortgage insurance.
If you would like to see what you could specifically achieve by refinancing, please reach out to a Norcom Loan Officer today!