Learn the Best Time to Refinance
Does the current housing market make any difference to go with a 30-year or a 15-year loan?
Is it true that it is not smart to refinance to a 15 year loan if you dont plan to stay in the house for more than 5 years. Does the current housing market make any difference to go with a 30 year or a 15 year loan????
There are many great reasons to refinance. With lower cost, adjustable rate, and 0-down options, traditional loan programs like 30-year or 15-year fixed rate mortgages don't always allow us to meet our financial goals. Today, even reducing your mortgage interest rate a little can save you big over the life of your home loan. Take a look below at some reasons to refinance.
1. Lower Your Monthly Payment
If you plan to live in your home for a few years, it may make sense to pay a point or two to decrease your interest rate and overall payment. Over the long run, you will have paid for the cost of the mortgage refinance with the monthly savings. On the other hand, if you plan on moving in the near future, you may not be in your home long enough to recover the refinancing costs. Calculating the break-even point before you decide to refinance can help determine whether it makes sense.
2. Switch From an Adjustable Rate to a Fixed Rate Mortgage
Adjustable rate mortgages (ARMs) can provide lower initial monthly payments for those who are willing to risk upward market adjustments. They're also ideal if you don't plan to own your property for more than a few years. However, if you have made your house a permanent home, you may want to swap your adjustable rate for a 15, 20 or 30 year fixed rate mortgage. Your interest may be higher than with an ARM, but you have the confidence of knowing what your payment will be every month for the rest of your loan term.
3. Escape Balloon Payment Programs
Like adjustable rate mortgage programs, balloon programs are great when you want lower rates and lower initial monthly payments. However, if you still own the property at the end of the fixed rate term (usually 5 or 7 years), the entire balance of your mortgage is due to the lender. If you are in a balloon program, you can easily switch over into a new adjustable rate mortgage or fixed rate mortgage.
4. Remove Private Mortgage Insurance (PMI)
Zero or Low down payment options allow homeowners to purchase homes with less than 20% down. Unfortunately, they also usually require private mortgage insurance, which is designed to protect the lender from loan default. As the value of your home increases and the balance on your home decreases, you may be eligible to remove your PMI with a mortgage refinance loan.
5. Cash In on Your Home's Equity
Your home is a great resource for extra cash. Like most homes, yours has probably increased in value, and that gives you the ability to take some of that cash and put it to good use. Pay off credit cards, make home improvements, pay tuition, replace your current car, or even take a long-overdue vacation.
If you want an introduction to pre-screened mortgage lenders, Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the Bills.com refinance page to find a loan that meets your needs.
As far as choosing between a 15 year and a 30 year loan consider this; A $100,000 loan for 15 years is going to cost you approximately $56,799 in interest as opposed to a 30 year loan which will cost you approximately $127,544 in interest. The main reason people choose a 30 year term is to get a lower monthly payment. You can do a direct comparison for your individual situation by entering your information into our online payment calculator. If you are able to afford the higher payments, it will be better to choose the 15 year term. The one main thing to keep in mind is that in the first 5 years of either of the loans, a major part of your monthly payment goes towards paying the interest.
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