Five Great Reasons to Refinance

There are many great reasons to refinance your home. The old rule of thumb—that you should only refinance when rates drop at least two percentage points—no longer applies now that banks offer low cost and no-cost mortgage refinance options. Even reducing your mortgage interest rate a little can save you thousands of dollars over the life of your loan. Take a look at these five great reasons to refinance:

1. Lower your payment.
If you plan to live in your home for a few years, it may make sense to pay a point or two to decrease your interest rate and overall payment. Over the long run, you will have paid for the cost of refinancing with the monthly savings. On the other hand, if you plan on moving in the near future, you may not be in your home long enough to recover the refinancing costs. Calculating the break-even point before you decide to refinance can help determine whether it makes sense.

The good news: We can often help you lower your monthly payment with little or no cost. Call us and we’ll show you how.

2. Convert from an adjustable rate mortgage to a fixed rate.
Adjustable rate mortgages are great if you want lower initial monthly payments and are willing to risk upward market adjustments. They're especially ideal for homeowners who don't plan to own a particular property for an extended period of time. However, if you are looking for more stability, you may wish to convert your adjustable rate mortgage to a 15-, 20-, or 30-year fixed rate home loan. Though the interest rate may be higher, you have the confidence of knowing exactly what your mortgage payment will be each month. Adjustable rate mortgages, on the other hand, can increase monthly payments to a level you can no longer can afford.

Put it this way: Timing is everything. When we get together, we’ll help you determine if the time is right to make the switch.

3. Balloon payment is due.
Like adjustable rate mortgage programs, balloon programs are great when you want lower rates and lower initial monthly payments. However, if you still own the property at the end of the fixed rate term (usually 5 or 7 years), the entire balance of your mortgage is due the lender. In this situation, a mortgage refinance into a new adjustable rate mortgage home loan or fixed rate makes sense.

Our advice: Don’t wait until the last minute to deal with the balloon payment. Call us at least three months prior to the due date and we’ll help you figure out your next move.

4. Remove private mortgage insurance (PMI).
If you bought your home with a down-payment of less than 20%, chances are pretty good that you were required to purchase private mortgage insurance as well. After you’ve been in your home for a while, however, rising home values combined with your monthly loan payments will often boost your equity beyond the magical 20% level. As a result, you may be eligible to remove your PMI the next time you refinance your home.

Our policy: It never hurts to ask. If you’re paying PMI, call us and we’ll figure out if there’s a way to make that extra monthly payment go away.

5. Cash out on your home equity.
Your home is a great resource for extra cash if you have equity. You can use the cash to finance your child's education, pay for home improvements, consolidate high interest debt.

Bottom line: We can help you put your equity to work for you. And it may even be tax deductible.