If you’re finding that your payments are too high and leaving you with little money left to cover other living expenses, you may want to consider options to lower your monthly mortgage payment.
Refinancing means taking out a new loan, but with different loan terms. This option can be beneficial when your new loan has a lower interest rate, you can get rid of your private mortgage insurance(PMI) or the new loan allows you to refinance to a longer loan term.
When you refinance to a longer long-term, your monthly mortgage payment will decrease since you have a longer period of time to pay back your loan. The interest on your mortgage may increase over time with this option, but your monthly payments will be lower. This is best for borrowers who need an immediate solution, and may want to consider fully refinancing their mortgage in the future.
Keep in mind that by refinancing your existing loan, the total finance charges may be higher over the life of the loan.
When purchasing your home, if you put less than 20% down on your original home loan, you are most likely paying private mortgage insurance (PMI). You may be able to eliminate this costly expense if your home has increased in value and/or you have enough equity put into your home. More home equity improves the likeliness of a lower interest rate on a refinance, which may lower your payments and eliminate PMI.
Keep in mind that Lenders won’t drop PMI automatically, you have to request it.