Many people do not realize all of the benefits that come with a mortgage refinance. Every financial institution is different so the terms will vary. However, overall you can typically expect a mortgage refinance to help with:
Improved Mortgage Rates
This is one of the most popular reasons that people refinance. Mortgage rates change all the time. Sometimes they may decrease since the time you took out your loan. Luckily, you can save on your rate with a refinance! This may be able to save you money. You can also see if you qualify for a lower rate if your credit score improved since you took out the loan.
A Lower Payment Every Month
One of the benefits of getting a lower interest rate is the fact that you can get a lower monthly payment as well. You can get a lower monthly rate if your new refinanced mortgage has the same payoff date, just less interest. However, you can also lower your monthly payment in other ways. You could increase your payoff time so that there are more months to pay off the balance.
Every mortgage is different. If you have an adjustable-rate mortgage (ARM) that means you may not have interest rate stability. It can increase or decrease which can make it difficult to properly budget for changing costs. When you refinance, you can choose a fixed-rate loan for your mortgage.
Reduce The Length of Your Term
Usually homebuyers have a 30-year home loan. When you refinance, you can change the loan repayment terms. You could reduce your loan down to a 15-year home loan instead! There may be other refinancing loan terms as well. Make sure to discuss available options with your lender.
The Ability to Borrow Money
A type of refinance option is called a cash-out refinance. This provides you the opportunity to borrow against the equity you own of your home to get the funds you need. At closing, you could get a check. That amount that you owe is then added onto the mortgage principle that you owe.
If you do a cash-out refinance then you can use the funds that you receive for financial management. You can take care of your debts by paying them off so that you only have to worry about one payment every month.
If you have a second mortgage, you can combine your mortgages with a refinance. You can also do this if you have a Home Equity Line of Credit (HELOC). This is convenient because you only have to deal with a single payment for your mortgage costs.
Get Rid of Mortgage Insurance
A refinance can help you get rid of your mortgage insurance once you reach 20% equity. This is also applicable to special FHA home loans that normally require mortgage insurance for the entirety of the loan.
Get a Person Off of the Mortgage
Unfortunately, there may be a person on your mortgage that you need to remove. Usually this occurs when going through a divorce. You can remove a person from a mortgage with a refinance. You can also remove a co-signer if you need. Sometimes you may require a co-signer in order to qualify for a mortgage. After time passes, you can remove them if you are able to handle the loan on your own.