There are many great reasons to refinance an existing mortgage. Mortgage interest has historically been treated differently than all other debt. In fact, mortgage debt is the only debt eligible for a reduction in federal income taxes.
Done correctly, refinancing can be a good financial move (always consult a financial adviser first, of course). Once you’ve decided to refi, reach out to a Michigan Mortgage professional to get the process going.
Here are 5 reasons to refinance.
Your credit score has improved since the original mortgage closing. Normally just adding a mortgage account that has been paid on time for a year or more can have a significant positive impact on an individual’s credit score. Mortgage rates are discounted for every 20-point increase in borrowers credit score up to 740. Depending on how much higher a consumer’s credit score has improved, the potential savings could be substantial, especially if combined with reason number two.
Your originally purchased with less than 20 percent down and you are paying Private Mortgage Insurance (PMI). Refinancing can be a great way to remove those extra premiums for their monthly payments. Since 1991, home values have increased an average of 3.3 percent each year, according to the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI). Just in the past year, home prices went up an average of 6 percent across the country.
You want to reduce the terms of the loan. When combined with number one and two on this list, a borrower could actually get a similar payment with a big reduction in years left to pay their mortgage. Going from a 30-year to a 15-year mortgage can result in thousands of dollars of interest savings over the life of the loan.
You want to combine high-interest loans to a lower, tax-deductible payment. Student loans, personal loans and auto loans traditionally are secured with higher interest rates than mortgage loans. Refinancing and paying off higher-interest loans can be a great way to simplify the number of payments made each month and reduce overall monthly payments.
You want a low-cost source of cash for home improvements or investments. Home improvements can improve the value of the home and many investments that pay higher than the after-tax cost of can provide a source of income over the cost of a mortgage.
A consumer’s best move to always to sit down with a Michigan Mortgage professional to determine the best course of action and match their mortgage to the consumer’s goals. If you would like to start, just call.
This blog post was written by experts at Mortgage 1 and originally appeared on www.mortgageone.com. Michigan Mortgage is a DBA of Mortgage 1.