JTS & Co. offers refinance options to customers throughout Mississippi and Alabama. We are located in Columbus, MS. Contact us today for a free consultation.
What Is Refinancing?
Refinancing is the process of obtaining a new mortgage in an effort to reduce or eliminate mortgage insurance , lower your interest rates, take cash out of your home for large purchases, or change mortgage companies. Most people refinance when they have equity on their home, which is the difference between the amount owed to the mortgage company and the value of your home.
What Are The Advantages Of Refinancing?
One of the main advantages of refinancing regardless of equity is reducing your interest rate. Often, as people work through their careers and continue to make more money their financial health improves and they can take advantage of optional loan programs as lower rates. A lower interest rate can have a profound effect on monthly payments, potentially saving you thousands of dollars a year in interest cost.
Reasons to Refinance
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. On the other hand, if a borrower is planning on a move to a new home in the near future, they may not be in the home long enough to recover from a mortgage refinance and the costs associated with it. 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. Borrowers who plan to make their home permanent may want to switch from an adjustable rate to a 30,15, or 10-year fixed rate mortgage, or FRM. ARM interest rates may be lower, but with an FRM, borrowers will have the confidence of knowing exactly what their payment will be every month, for the duration of their loan term. Switching to a FRM may be the most sensible option, given the threat of forclosure, and rising interest costs.
Eliminate 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. PMI is designed to protect lenders from borrowers with a loan default risk. 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.