Lower Your Rate and Payment
If your current interest rate is higher than what is currently available in the market, it is probably a good idea to see how much you could save by refinancing. There are no-cost and low-cost options that could save you money with little to no investment.
Convert your adjustable rate into a fixed rate. Adjustable rate mortgage (ARM) loans are a great way to ease into your mortgage payments, especially if you are a first time buyer or if you need lower payments initially. Eventually, if you decide you will stay in your home longer, you may want to consider refinancing that adjustable into a long term fixed rate loan. Doing so will give you peace of mind, knowing that your rate and payment will not change for a set period of time.
Convert your interest-only loan into a fully-amortized loan. Like ARMs, interest-only loans are a great way to minimize your mortgage payments at the beginning; however, because you are not paying any principal, your loan balance does not decrease. If you plan to keep your home long term, you probably want to start paying off your loan. Often, you can refinance your interest-only loan to a 30 year fixed rate loan while keeping your payments about the same.
Remove mortgage insurance. If you purchased your home with less than 20% down, chances are you’re paying private mortgage insurance (PMI). Refinancing will help you eliminate the extra expense if you’ve paid down your loan balance and/or have seen an increase in your home’s value to a point where you have at least 20% equity in your home, or a loan-to-value (LTV) of 80% or less.