Put More Cash into Your Refinance Now to Save Long Term
Interest rates are down and interest in refinancing is way up. People all across the country are looking to capitalize on record low rates and own their home years sooner. There are a few of the ways in which adding cash to your refinance can really save you money. Let’s have a look at some of these options that consumers today have to choose from:
One of the biggest money savers in adding cash into your mortgage is avoiding the need for Private Mortgage Insurance (PMI). If your loan to value (LTV) ratio is above 80%, you will need to pay to have the extra insurance. Once your LTV ratio drops below that amount, you no longer need to make those payments. Obviously, not paying those fees each year will save you big cash.
Reduce the Term
The fact is that the more you pay down on your mortgage, the more quickly you will be able to own your home. Something that has become more common in refinancing recently is that borrowers are reducing their term as well as their interest rate. Changing from a 30-year mortgage to a 15- or 20-year loan will have you owning your home years sooner. Adding cash in at the time of close also reduces the overall monthly payment. By doing both, you can keep your monthly payments reasonable and jump on the fast track to homeownership.
Another option for adding cash into your refinance is to pay down points. These will lower your overall interest rate for the life of you loan. This can be beneficial if you are looking to keep your current mortgage as is, but want to lower your monthly payments. Paying points combined with low interest rates could have you saving thousands each year on your mortgage.
If you have questions about these mortgage options or how to fund your home improvements, send a question to Bill, the Bills.com resident expert.