13 Reasons Why to Refinance your Mortgage!

1. You want a lower payment

Sometimes money is tight and you just need a lower payment. Maybe there has been a pay decrease in household income. Maybe credit cards and other monthly debts have gotten too high. This is not the best move financially, but you just need to survive.

2. You want to use some equity for home improvements.

Home improvements can be expensive.  If you plan to stay in your home and don’t have cash, you can refinance your mortgage and take cash out to pay for your home improvements. The idea is that you will be increasing the value of your home.  This is the best option for homeowners who would benefit from refinancing anyway, perhaps with a lower interest rate, as long as they don’t spread the cost of the improvements over more years than the renovation will last.

3. You want to pay off your mortgage faster.

If you are planning on staying in your home and want to pay off your mortgage quicker you can refinance into a 15 year fixed rate mortgage. The rates are lower than a 30 year fixed and and you will save an enormous amount of interest. The downside is your payment will go up.

4. You got divorced.

If the marital home is awarded to one party in a divorce settlement and both names are on the mortgage, it is best to refinance in order to avoid liability should your former spouse default on the loan.

5. You want to remove someone from your mortgage.

Often times a parent will co-sign for a mortgage for their children. Then later the parent needs to make a financial move but can’t because they are liable for the mortgage for which they co signed. This is an excellent reason for the child to refinance the mortgage.

6. You want to save money.

Sometimes current mortgage rates are much lower than when you obtained a mortgage. You can easily go from a 30 year fixed rate mortgage at 4.75% to a 23 year fixed rate mortgage at 3.75%. You not only save 7 years but you save interest expense and sometimes if the rate is that much lower your payment may go down.

7. You want a lower rate.

Maybe you got a mortgage when rates were over 6% and now they are closer to 3%. Maybe you were unable to refinance until now due to lack of equity, or inability to document income. Now may be the time.

8. Your current mortgage has a balloon payment coming due.

Some people purchase a home with a mortgage that has a balloon payment. This means that your whole loan is due in full. The original intention was to pay it off but now you are unable to do so. Refinance it.

9. You are currently in an ARM and want a Fixed Rate.

Adjustable Rate Mortgages are fixed for a period of time such as 5 years then they adjust to a higher interest rate. When this happens, the payment goes up. A refinance will take care of that.

10. You want to pay off your Home Equity Line.

In the past, homeowners who took out home equity loans were able to deduct the interest up to $100,000 from their taxes. Under the new tax bill, homeowners will not get the deduction. It may make sense to refinance the home equity line into a fixed rate mortgage which typically does allow for the interest deduction.

11. You just received a large sum of money.

Say you owe $400,000 on your mortgage and you inherited $200,000. Normally if you put that money toward your mortgage your payment would stay the same.  You could take this money to pay down your mortgage to $200,000 and refinance the mortgage to a 15 or 10 year fixed. You payment may be the same or even lower depending on the interest rate.

12. You want to get out of a FHA loan.

FHA loans have mortgage insurance which adds to the monthly housing cost. The mortgage insurance can never be removed. You can refinance from an FHA loan to a Conventional loan that does not have mortgage insurance. This can help save hundreds of dollars.

13. You want to add your spouse to the mortgage.

You can add your spouse to your home’s deed, but if you don’t pay your loan, both of you can still lose the house. If you want to add your spouse to the mortgage and deed of your home, one option is to refinance and add him/her to the mortgage.