6 Reasons to Review Your Home Loan Structuring
Here’s Why You Should Review Your Home Loan Today
Whether you took out a home loan 5, 10, or 15 years ago, chances are you haven’t reviewed the structure of your home loan recently. Even if you’re content with the service from your mortgage lender, it’s possible you could be paying for loan features you don’t use, or you could be missing out on a more current special promotion from your lender.
To get the most out of your home loan, it’s important to consistently review the specifics of your loan situation. Here are six reasons why you should review your home loan structuring today, to learn whether there’s a better deal out there for you.
Loan Rates Remain Low
According to the Mortgage Report, “Not only did rates fail to rise as 2017 rolled on, they actually dropped. According to mortgage agency Freddie Mac, the average 30-year rate is down 40 basis points (0.40%) from its March 2017 high.” As loan rates stay low, now’s a great time to review your loan structure to make sure you’re not paying higher interest than you need to.
Home Values Continue to Increase
An often-underappreciated fact in the real estate community is that rising property values can make refinancing or restructuring your loan worthwhile, and here’s why. Home equity is defined as the market value of the home (not the purchase price of the home), minus the amount owed on the mortgage. If your home’s value has increased in the past five years, then you’re going to accumulate equity in your home at a much faster pace.
This notion comes in handy for those who may be looking to alter their original home loan’s terms and conditions, as you reach the baseline equity requirements to be eligible for a cash-out refinance or for removing private mortgage insurance – more on that in a minute.
Remove Private Mortgage Insurance
If your initial down payment on your home was under twenty percent, then it’s likely that your mortgage lender required you to purchase private mortgage insurance. However, if you have at least twenty percent equity in your home, then you may be eligible to save big by canceling your private mortgage insurance.
When your home mortgage balance drops to 78 percent, you can restructure your loan to forgo private mortgage insurance – potentially saving you hundreds of dollars each month on your mortgage payment.
Change to a Shorter Term Loan
After paying a few years of installments on your home loan, you should review your loan structure to see if you’re eligible for a shorter-term loan. By increasing the repayment amount each month, you can change a thirty-year loan to a fifteen-year loan, potentially saving you thousands of dollars that would otherwise be spent on paying interest.
Release Equity
Over time, as your home’s value increases and you make regular mortgage payments, you accrue equity in your home. After a while, you can use this equity as leverage to purchase other property or renovate your home. You may be wondering how this is possible, and it’s simple. By refinancing your mortgage and restructuring your home loans, you can free up equity to put towards other projects and investments.
Debt Consolidation
In tandem with refinancing, consolidating personal loans into your home loan can save you thousands when it comes to money spent on interest charges. By rolling credit card or personal debts into a monthly or bi-monthly home payment, you will have fewer debt-based bills to consider.
Ultimately, this will make budgeting and managing your finances that much easier. This simple change to your home loan structure can go a long way towards improving your monthly cash flow.
