The home mortgage is the largest monthly expenditure in most family budgets. However, it is also the debt payment that has the potential to offer the largest financial return over time. Unlike debt payments on vehicles, appliances, and other items that quickly go down in value, mortgages represent secured debts on a home that should appreciate in value over the decades of ownership, depending on care and on the area's market trends and influences.
Homeowners may consider refinancing their home mortgage one or more times during the repayment period, but taking this type of action is wisest when doing so will provide them with direct benefits. If you are a homeowner interested in refinancing your home, here are some tips for determining the most advantageous time for you to do so.
When you can move from an adjustable rate to a fixed
If your current home loan has an adjustable rate mortgage, refinancing to one with a fixed rate is a very wise idea. In addition to eliminating the risks of being saddled with an unaffordable interest rate in the future, homeowners can use this type of refinancing to eliminate balloon payments and enjoy more financial stability over the life of the loan.
When you can eliminate PMI
Eliminating expensive private mortgage interest payments is another very beneficial reason for opting to refinance your home loan. In most cases, this is possible as soon as you reach the point of having a 20% equity stake in your home. With most PMI costs currently ranging from 0.5% to 1% of the home loan amount annually, refinancing to eliminate it could potentially save you hundreds of dollars each year. To save even more on this type of refinance, homeowners with very good credit and repayment histories can also use this time to shop for a lower interest rate or better repayment terms.
When you can use the funds to reduce other debts or high interest rates
Another benefit that families can reap through refinancing their home mortgage is using the proceeds to clear other debt payments, such as consumer debts that may have much higher interest rates than a home mortgage. Refinancing can also be beneficial when the family is hit with large expenditures for college tuition, medical bills, or unexpected home repairs or improvements that could wipe away savings or create a too-tight budget scenario.
To learn more about using home refinancing as profitably as possible for the benefit of your family, contact a reputable lender or mortgage broker in your area. These lending professionals can help you understand your available refinancing options so that you can make a smart financial decision.
To learn more about refinancing, contact a lender near you.