We’re probably not the first to tell you that right now is an excellent time to refinance your home mortgage. After all, FHA current rates are currently at historical lows! But what are the reasons to consider an FHA home refinance or “refi”, for short? Here’s a quick explanation of why homeowners go through this process.
Why Homeowners Refinance Their Loan
1. Do a Cash-out Refinance to Pull Equity Out of Your Home
Known in the industry as a cash-out refi, this option lets you pull equity out of your home and get a check for those funds. Your loan principal amount then increases, but you typically only go through this process when interest rates are low, so your monthly mortgage payment usually only increases marginally.
Many people pull equity out of their homes to do home improvements. Whether you want to update your kitchen, bathrooms, or build an addition on your home, a cash-out refi is a great way to get the funds for these projects while also adding value to your home.
2. Refi from an FHA Loan to a Conventional Loan to Drop PMI
All FHA loan holders pay monthly PMI, which stands for Private Mortgage Insurance. This money doesn’t lower your principal but is an insurance payment to your mortgage company in the event you default in the future.
However, once you’ve reached what’s called a 20% loan to value ratio, meaning you have at least 20% of the value of your home in equity, you can move to a conventional mortgage to drop the PMI for good! This can save homeowners as much as a few hundred dollars a month on their mortgage payments!
(READ: The Different Types of FHA Refinance Loans)
3. Refinance for a Lower Interest Rate
Interest rates go up and down. You may have purchased your home at a rate that was good for the year that you bought it. But right now, rates are at historical lows. Check your interest rate on your monthly mortgage statement, then fill out our free online quote so you can be matched with a mortgage lender who can tell you if they can cut your interest rate on your loan based on your current credit situation.
4. Refi to a Shorter Term Loan So You Can Pay Your House Off Sooner
Home mortgages come in different terms. While the most popular mortgage term is 30 years, you can also get a mortgage for 20 years, 15 years, or even 10 years!
Some homeowners see that their incomes increase in the years after they’ve purchased their homes and that they have extra money available to put towards their mortgage to get it paid off sooner. At times like now when interest rates are so low, it makes sense to refinance to a lower term loan so you can also benefit from a lower interest rate. The end result is that you pay off your home faster and pay less interest overall!
(ALSO READ: What Is FHA Short Refinance Program and How Does It Work?)
Whatever Your Reasons to Home Refinance, We Are Here to Help!
Whichever one of these above situations describes you, we can help. We have a network of mortgage lenders who are ready to reach out to you and offer their loans and terms, so you don’t have to do tons of research yourself. Simply fill out our free online quote, and you’ll be matched to a lender. It’s that easy!
