This article tells you about 4 Reasons To Do A Mortgage Refinance. What is the purpose of getting a mortgage refinance? Should you even get one? There are many reasons to get a mortgage refinance but I am going to uncover the top 4 reasons to get one. Before we get into the top 4 reasons, what makes you interested in getting a mortgage refinance?
Did you know that when you do a mortgage refinance there will be fees tacked onto your existing loan, so it is only a wise choice to go through with it if there will be a big difference in interest, payments, or loan length?
Take Out Your Homes Equity
Taking out equity in your home is normally done to pay off bills and become debt free other than your home or to get some cash to fix up your home. There are many other reasons people refinance their loan and take out the equity but these the most common.
The one thing I caution you about when taking out the equity in your home is to not take more than 80% of the equity out because once you do you will be required to pay private mortgage insurance(PMI). Private mortgage insurance may not sound like a big deal to you now but it will once you see you are paying hundreds per month for it.
One tip I have for anybody who is thinking about using their homes equity to pay off bills and debts is to let your lender send the checks to the companies. This simple task not only saves you the trouble but it is also a great way to show the lender you are serious about paying off debt and because of that they will often times give you a smaller interest rate.
Get Rid Of PMI
Since we are already talking about PMI let’s get right into it. Why do I have PMI in the first place? The reason most homeowners have PMI is because they bought the house with less than 20% down. Now I understand most lenders allowed people to get into new and existing homes for little or no money down but that is only because they knew they had PMI to fall back on in case you didn’t pay your loan or the value of the house dropped.
Now that you understand why you have PMI the one way to get rid of it is to owe less than 80% of the homes value. The nice part about this is normally houses increase in value while simultaneously you are paying the debt down. Since most people pay between $100-$200 per month for PMI it will often times take you about 2 years of not paying the private mortgage insurance to make up for the amount you paid in fees for the refinance, so if you plan to sell your home in a couple years this may not be the best idea. Normally getting rid of PMI should be partnered with another reason or else it isn’t worth it.