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January 12, 2023

What Are the Benefits of Refinancing? Making Your Home Work for You

Did you know you can refinance your home at almost any time that you want? There are lots of lenders that will make it possible for you to get your hands on a new home loan that will take the place of your old one.

If you haven't ever considered home loan refinancing, you should think about refinancing a loan sometime soon. There are so many advantages that will come along with doing it.

Today, we're going to walk you through some of the top benefits of refinancing so that you're able to see why it would make so much sense to go through the refinancing process. Continue reading to check out five of the biggest benefits of doing it.

1. Reduces Your Interest Rate

When you first bought your current home, the mortgage you obtained to purchase it came with a certain interest rate. If the interest rates that are available on home loans right now are lower than this rate, you can give yourself access to them by refinancing your home loan.

This is easily one of the best benefits of refinancing. You might be able to make your monthly mortgage payments significantly lower simply by taking the time to refinance.

Generally speaking, if you're able to get an interest rate on a new loan that's even just 1% lower than your existing rate, it's going to make it possible for you to save thousands of dollars over the life of the loan. That alone should get you excited about refinancing.

2. Allows You to Lock In Your Interest Rate

Do you happen to have an adjustable-rate mortgage for your home at the moment? If you do, the interest rate on this type of mortgage is going go up and down on a regular basis and make it challenging to keep up with where your monthly payments stand.

In some cases, an adjustable-rate mortgage might even put you into a position where you won't be able to afford your monthly payments anymore. It'll be another reason to consider refinancing your home.

When you refinance your mortgage, you'll be able to lock in your interest rate for the long haul. You won't have to worry about your interest rate fluctuating anymore, which will provide you with much-needed peace of mind.

3. Gives You the Chance to Pay Off Your Home Sooner

The majority of people take out 30-year mortgages when they purchase homes. This allows them to spread their mortgage payments out over the course of 360 months.

If you're okay with this arrangement, you're welcome to take out another 30-year mortgage when you refinance your home. But you might also want to kick around the idea of turning your 30-year mortgage into a 15-year one.

If you're able to get a lower interest rate on a 15-year mortgage than the one you have on your 30-year mortgage, you might be surprised to see what your new monthly payments will be. They could be the same or even less than your current monthly payments, and you will only have to make those payments for half the time.

At the very least, it would be worth exploring a 15-year mortgage to see what your new monthly payments would be. Refinancing to this type of mortgage could be one of the best financial decisions you ever make.

4. Enables You to Obtain Money for Home Improvements

Are there home improvement projects that you've been putting off for months or even years now because of the costs associated with them?

Maybe you have an outdated kitchen that needs to be remodeled. Maybe your family is on the brink of outgrowing your house and it could use an addition. Or maybe you have something like a roof, windows, or siding that need to be replaced.

Whatever the case, you might be able to secure the money you need for the home improvement project you want to pull off through refinancing. You can take advantage of any equity you might have in your home while refinancing your mortgage and use to it pay for any project you want.

5. Helps You Eliminate Private Mortgage Insurance

Most lenders are going to ask you to put down a 20% downpayment when you first buy a home so that you have a financial stake in your house from the beginning. If you can't do this for one reason or another, they might still provide you with a mortgage, but you'll need to pay for private mortgage insurance, or PMI, to get it.

In most instances, you'll then need to keep PMI until you're able to make enough mortgage payments to build up enough equity in your home to remove it. More often than not, that will take you years to do.

You'll also have the option to refinance your home to get rid of PMI for good. It's probably the easiest way to eliminate PMI fast without having to spend a lot of money at once.

Embrace the Many Benefits of Refinancing

As you can see, there are so many benefits of refinancing that you'll enjoy when you decide to refinance your home. You'll wonder why you didn't make the decision to do it sooner after you refinance and reap the rewards.

Would you like to look into refinancing your home to get yourself a better deal? We would love to speak with you more about the pros and cons of refinancing in your specific situation.

Contact us to get more information on how to refinance a mortgage so that you can put yourself in a better financial spot.

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