Reduce your monthly payment. Most homeowners are budget-minded and want to keep monthly expenses as low as possible. A home refinance can help with this by taking advantage of the low rates. If you want to reduce your monthly home mortgage payment there are a few options to consider.
If you have a long-term 30-year mortgage on your home that you’ve paid off for a number of years, refinancing the lower amount for an additional 30-year term, and at a lower interest rate, will decisively lower your monthly payments. However, the short-term benefit of lower monthly payments means you will pay out more overall because you are extending the time period of the loan.
Pay off the home mortgage sooner. Say you’ve paid for 10 years on a 30-year mortgage. Now you can get a lower interest rate and refinance the amount you owe in a 15-year mortgage loan. This reduces the time period and, at a lower interest rate, will assuredly lower the overall amount you will pay on the loan. However, the long-term benefit of paying less will mean your monthly payments might be slightly higher due to the 5 year reduction in payoff time period.
Obtain home equity cash. If you borrow more on your home refinance mortgage than you currently owe on your home, you can get home equity cash for the difference between the amount owed and the amount of the loan. Having a home equity payment can help you conduct home maintenance, home repairs, pay off bills, or take a vacation.
Switch to a fixed-rate loan from an adjustable loan. Assuming the home mortgage loan interest rate is exceedingly low, if you currently have an adjustable rate, switching to a fixed rate mortgage loan can lower your monthly payments and assure that you will pay back the same low monthly rate for the term of the loan.
Get rid of FHA or private mortgage insurance (PMI). If you have adequate property appreciation or enough of the principal paid off, getting a home refinance loan can enable you to remove the obligation to pay mortgage insurance. This will also reduce your total monthly mortgage payment.