Homeowners: How Refinancing Can Save You Loads of Money
Friday, March 30, 2018, 6:00 PM | Leave Comment
Refinancing a mortgage may allow a homeowner to save hundreds or thousands of dollars per months and over the course of the loan.
By obtaining new home loan terms, it may be possible to reduce the amount of interest paid on the loan.
It may also be possible to get rid of mortgage insurance imposed by a previous lender.
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Reduce Your Interest Rate
One way to save money through refinancing a mortgage is by reducing the interest rate on the loan.
Lenders may be willing to charge a lower interest rate if you improve your credit score or if market conditions have changed since you got your original mortgage.
By reducing your rate from 4.5 percent to 3.5 percent, you could save roughly $92 a month.
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Pay Less Interest Overall
By refinancing your mortgage to a shorter term, you can reduce the amount of interest paid to a lender over the life of the loan.
Many lenders such as Homemortgage.com can help you refinance from a 30-year mortgage to a 10 or 15-year home loan.
Before you choose to shorten your loan term, be sure that you can afford the increased principal payment.
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Get Rid of Private Mortgage Insurance
If you put less than 20 percent of the home’s purchase price down at closing, you could be required to pay private mortgage insurance.
The premium is equal to 1 percent of your home’s value each month if you buy a home with an FHA loan.
However, financial institutions may choose to charge a different amount based on their lending standards.
By refinancing your mortgage, you can get rid of PMI and significantly reduce your monthly payment.
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Pay down a Mortgage Faster
A cash-in refinance allows you to make a lump sum payment on your old loan and create new loan terms going forward.
Since you will owe less on the loan, your monthly payment may also be lower assuming that the term on the new loan is the same as on the old one.
It may also give you more equity in the home, which may eliminate PMI or lower your interest rate.
By refinancing your mortgage, it provides a variety of opportunities to save money both now and in the future.
It may be worthwhile to use an online calculator to determine what type of loan product may be best to fit your needs and budget over the long-term.
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