Do I need to refinance?
Have you been dreaming of remodeling your home? Or do you want
to reduce your monthly mortgage payment? Or would you want to save
money by paying off your credit card debt, reducing your risk and
total, or eliminating your Private Mortgage
Insurance payment (PMI)?
If you'd like to do achieve these financial goals, or merely build
equity, you should consider refinancing your mortgage.
Guideline for refinancing
Refinancing may be a good option for you if:
- Interest rates are less than your current rate by 2 percent
or more.
- Rates are almost 2 percent less, but you plan on staying in
your home for a long time.
- You can pay off a new loan in less time with roughly the same
monthly payment as you're currently making.
Refinancing means that you take a new loan with a lower interest
rate to pay off your original loan (that may have a higher interest
rate). Take a look at the six categories below. If any of these
fit your financial objectives, you'll want to talk to the professionals
at SLM Financial Corporation about refinancing.
Reduce your monthly mortgage payments
Extend your loan's term. By doing so, you increase the amount of
time it takes to pay off your loan but you lower your monthly payments.
Alternately, you can convert your mortgage from an Adjustable Rate
Mortgage (ARM) to a Fixed-Rate Mortgage. This is especially good
if interest rates fall or stay the same.
Reduce your monthly interest payments
If interest rates have dropped, refinancing could save interest
costs. Or if interest rates haven't changed, you can change the
terms of your loan (from a 30-year mortgage to a 15-year mortgage).
Even though your monthly payments may stay the same or even slightly
increase, you're paying more on principal than on interest. Converting
to a new ARM may also lower your interest payment, as ARM's generally
have a lower introductory interest rate until the first interest
rate adjustment.
Reduce your risk
Convert your ARM to a Fixed-Rate Mortgage. With an ARM, your monthly
payments go up when interest rates rise. By locking into an interest
rate when you go with a fixed-rate mortgage, interest rate hikes
do not affect you.
Build equity faster/eliminate PMI
Shorter mortgages generally have lower interest rates than longer
term mortgages (15-year vs. 30-year). More of your payment goes
towards your loan's principal. Your monthly payment may increase,
but you pay off your loan earlier, reduce your total loan costs,
and build your equity faster. If your refinancing interest rate
is lower than your existing mortgage interest rate, your monthly
payments may not increase by much. Plus, the sooner you build equity,
the faster you can eliminate your PMI payment.
Get cash/Pay off credit card debt
Refinancing also allows you to tap the equity in your home for major
purchases and projects like home improvement. In fact, capital home
improvements (such as building an addition, adding a swimming pool,
or a new roof), increase your home's value. You can even fund your
child's education through refinancing! Best of all, you can consolidate
several credit card payments with varying interest into one monthly
bill with a lower interest rate.
Tax advantages
When you refinance just your mortgage balance, interest on the entire
amount may be tax-deductible. And when you're making home improvements,
you may be able to deduct all interest payment on the loan plus
the full amount of points related to that specific improvement.
Refinancing requires many of the same steps you took when obtaining
your original mortgage. The experts at SLM Financial Corporation can help you
achieve your dreams! Call 800/SLM-5510 (756-5510) for more information
and advice.
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