Refinancing a mortgage is beneficial to many homeowners who want to pay off their loans. With a lower interest rate, more of their mortgage payment will go towards their principal.
If you are contemplating whether to refinance or not, consider the following options.
Convert ARM to a Fixed Mortgage
Adjustable-rate mortgages (ARM) are an option for people who don’t expect to keep their home long. They may also work for those who simply want a lower mortgage rate for a while.
However, circumstances may necessitate that an investor or a buyer keep their home. If you have an ARM, consider converting your mortgage into a fixed-rate mortgage. A fixed-rate mortgage will prevent your mortgage payments from fluctuating. It will also allow you to pay money towards your principal.
Tapping the Equity in Your Home
As a homeowner, the purchase of your home was more than a place to live. It was an investment. As such, it’s likely you’ve watched your home appreciate over the years. The difference between what you’ve paid and the increased value of your home is your equity. You can refinance your home and convert your equity into cash.
For many people, refinancing to cash out on their equity allows them to pay off debt. It may also help them buy a paid-up life insurance policy that will benefit their family.
Reduce Your Mortgage Term
When you refinance your home, you reduce your interest. By reducing your interest rate, you can reduce your payment, ultimately. As a result of a lower payment, you can effectively reduce the term of your mortgage. In fact, many people refinance their mortgage loan to reduce their term from 30 years to 15 years.
Eliminate Private Mortgage Insurance
If you bought your home and put a down payment less than 20%, then it’s likely you pay private mortgage insurance (PMI). PMI is an expensive home insurance.
Fortunately, if you’ve paid your mortgage, and the value of your home has increased, you can replace PMI with affordable home insurance. Traditional home insurance offers you more benefits, and it’s less expensive than PMI.
There are many reasons why you should consider refinancing your home. However, it is important to talk to an accountant and a mortgage expert before you make a decision.
We are here to get you the correct policy at the right price. Call us at (610) 269-4500 for Philadelphia home insurance.