COVID-19’s adverse effects on the world don’t start and end with the healthcare sector; it also affects numerous industries in employment and business management. The current economic conditions force employees and business owners to buckle up with the economy’s unexpected future. Although COVID-19’s damage worldwide won’t end soon, it’s important to make crucial decisions for your long-term financial commitments.
Refinancing your mortgage is a strategy you can use to give yourself a better deal for your loans if you’re not at your best financial standing due to COVID-19. Thankfully, it’s not as rigorous and complex as buying your first home.
Understanding mortgage financing
As its name implies, mortgage refinancing is revising your original loan for potentially lower interest rates. It lets you take out a more affordable loan to pay off your original mortgage plan. Generally, you’ll end up paying most of the same closing costs, together with its other fees. However, you can receive numerous benefits from using this financing technique.
In this article, we will share three benefits of mortgage refinancing.
1. Speeds up your debt-free deadline
Mortgages can put you in debt for a range of 15 to 30 years, depending on your plan. This gives you plenty of time to refinance for better rates due to market changes. It’s realistic to expect better offers in the market due to fluctuating economies and market trends.
Besides getting a better interest rate, you can also reduce your loan term and find a better 15-year deal. This allows you to start saving sooner by being free from your mortgage debt. Even if you don’t have a substantial salary increase in the next few years, you’ll still pay more on your principal each month to speed up your goal of being debt-free.
2. Frees you from paying Private Mortgage Insurance (PMI)
It’s common for lenders to request Private Mortgage Insurance (PMI) if you can’t pay 20% of your home’s value upfront. However, market trends and changes in the economy will substantially affect your home’s current value. This allows you to refinance with a new home that’s based on your home’s new appraised value.
You can then ask to remove the PMI due to the lost “marketability” of your property. Once COVID-19 dies down, you can enjoy the same low mortgage rates. This is an advantageous bargain to have while your home’s market value comes back again as the local and global economy recovers.
3. Allows you to switch your loan type
Different loan options can seem like a bargain at first, but prove to be problematic later on. For example, an adjustable-rate mortgage (ARM) can be beneficial or disadvantageous, depending on the current market’s condition. For the first few years, you’ll stick with a fixed rate that may fit your current financial situation. However, this rate resets periodically in months or years, making it a risky mortgage plan.
Since your mortgage rates can fluctuate over time, you may experience low and high years. This unpredictability can be problematic for people who need stability during difficult financial times. Thankfully, you can refinance out of an ARM to a more stable fixed-rate mortgage.
Financial stability is one of the most crucial values you need to reinforce during this time of struggle. This is why it might be the best option to refinance your mortgage to brace for potential difficulties with your cash flow and investments later on. However, you need confirmation from experts to ensure if it’s the right move for you. You should consult with mortgage professionals who can assist in your particular situation.
Getting professional assistance will ensure that you’re making the right long-term financial choices. If you need mortgage experts to help you refinance mortgages in Salt Lake City, our team is ready to help you. Contact our mortgage experts today to receive a bespoke financial service that fits your needs.