Want to Take Cash Out?
You can use your refinance as an opportunity to consolidate debt. This may allow you to lower the amount you’re paying on your total monthly bills, because the interest rate on your mortgage is probably going to be lower than the rate you’re getting on your credit cards or the other types of bank loans.
Achieve tax benefits
Another reason to consider taking cash out on your refinance is that your mortgage interest may be tax-deductible, while your credit card interest is not.
- A Lower Monthly Payment. To decrease the overall payment and interest rate, it may make sense to pay a point or two, if you plan on living in your home for the next several years. In the long run, the cost of a mortgage finance will be paid for by the monthly savings gained. Therefore, it is important to calculate a break-even point, which will help determine whether or not the refinance would be a sensible option. Go to a Fixed Rate Mortgage from an Adjustable Rate Mortgage. For borrowers who are willing to risk an upward market adjustment, ARMs, or Adjustable Rate Mortgages can provide a lower montly payment initially. They are also ideal for those who do not plan to own their home for more than a few years.
- Avoid Balloon Payments. Balloon programs, like ARMs are a good ideal for lowering initial monthly payments and rates. However, at the end of the fixed rate term, which is usually 5 or 7 years, if borrowers still own their property, then the entire mortgage balance would be due. With a ballon program, borrowers can easily switch over into a new fixed rate or adjustable rate mortgage.
- Banish Private Mortgage Insurance (PMI). Low or zero down payment options can allow buyers to purchase a home with less than 20% down. Unfortunately, they usually require private mortgage insurance. As the balance on a home decreases, and the value of the home itself increases, borrowers may be able to cancel their PMI with a mortgage refinance loan. The lender will decide when PMI can be removed.
- Cash out a portion of the home’s equity. Generally, most homes will increase in value, and are therefore a great resource for extra income. Increased value gives the opportunity to put some of that cash to good use, whether it goes towards purchasing vacation property, buying a new car, paying your child’s tuition, home improvements, paying off credit cards, or simply taking a much needed vacation. Cash-out mortgage refinance transactions are easy, they may also be tax deductible.
See if refinancing makes sense for you. Our home refinance calculator shows how much you can save locking in lower rates or contact us by phone and one of our Loan Officers can help you.