Whether you're looking to lower your monthly payments, tap into your home's equity, or secure a better interest rate, understanding the impact of refinancing on your mortgage and homeowners insurance is crucial. While there can be plenty of benefits to refinancing your mortgage, there are many factors to consider before you decide if it’s the right move for you, including mortgage lender insurance requirements and how they can affect your coverage. In this article, we’ll explore what it means to refinance your home, the benefits of doing so, and the right time to refinance.
What does refinancing your home mean?
Refinancing your home essentially means trading in your old mortgage for a new one. You’ll pay off your original mortgage loan by taking out a new loan. The process of refinancing your mortgage works similarly to how you got the mortgage in the first place. You’ll shop around and compare interest rates to find a mortgage lender that has the best offer for you, comparing the terms of your existing mortgage to the one you want to replace it with.
Benefits of Refinancing Your Home
There are a variety of benefits you may be able to take advantage of if you refinance your home. It can be a strategic financial move that allows you to optimize your mortgage terms, reduce your monthly payments, and access the equity in your home to support your financial objectives. Here’s an overview of the potential advantages of refinancing your home:
Lower Interest Rate and Payment: If the market or your credit score has improved since you first got your mortgage, you may be able to save money with a lower monthly payment and/or lower interest rate.
Cash Out: You may be able to cash out a portion of your mortgage loan if you have a considerable amount of equity, which represents ownership or interest in an asset after deducting any related liabilities, in your home. The portion you cash out can be used to pay bills or finance a large purchase.
Change Rate Type: If you originally got an adjustable-rate loan, you can switch to a fixed-rate loan to avoid market fluctuations.
Change Loan Term: If you shorten the term of your loan, you can typically qualify for a lower interest rate.
When You Should Refinance Your House
Refinancing your home is not something you should do spontaneously or without careful consideration because while there are many benefits, there can also be pitfalls. The common reasons people refinance their homes are either to switch the type of mortgage they have or to secure a lower interest rate. If you want to take advantage of lower market interest rates, have improved your credit score, are looking to cash out a portion of your equity, or want to reduce your monthly payment with a longer repayment term, then you should consider refinancing.
Save More Money by Re-Shopping Your Homeowners Insurance
An easy way to lower your monthly expenses is to reevaluate your homeowners insurance coverage. Carriers offer discounts for certain home improvements that you may have done since purchasing your home insurance policy. You may also find that bundling multiple insurance policies with one carrier is an easy way to not only manage insurance payments but also receive a home insurance discount. Working with SelectQuote makes it easy to do both: re-shop your home insurance and help you find out if you’re eligible for any policy-related home insurance discounts.
See How Much Money You Can Save with SelectQuote
When you’re looking for ways to save, you may want to consider refinancing your mortgage and shopping for affordable home insurance. At SelectQuote, we make this process easy, providing you with several unbiased quotes from several of the nation’s most highly trusted carriers in just minutes. With nearly 40 years of industry experience, you can rely on our licensed insurance agents to help you find the policy that meets your needs at a price that’s right for your budget.
