FHA Loans are perfect because of low down payment options and flexible for those with a low fico score. However, after a few years of making consistant mortgage payments the principle gets paid down and rising home values in certain areas you may be building equity in your home. In additon, making these mortgage payments on time is one of the fastest ways to increase your credit score. Therefore, if you purchased your home with an FHA loan in recent years chances are you have earned home equity and improved your credit score. You may now qualify for new home loan with a rate and term refinance or even a cash out refinance and these could be some advantages:
- Remove Mortgage Insurance: FHA Loans require that you have mortgage insurance for the entire loan term. A mortgage refinance into a conventional loan is no longer required provided the new loan-to-value ratio is beneath the conventional guidelines for PMI ( Private Mortgage Insurance ). Even if you do not meet this guideline and you are required obtain mortgage insurance with your new loan, you are allowed to cancel your PMI once you have obtained enough equity to meet the requirement because it is not a requirement of the loan as it is with an FHA loan.
- Reduce your monthly payments: Todays mortgage rates are low enough to lower your monthly payments alone. But you can even improve your payments by extending the loan term and in conjuction with not having to pay private mortgage insurance. This combination can potentially result in a large savings monthly due to obtaining mortgage refinance into a low fixed rate loan like a 30 year fixed mortgage. Or select a loan with an adjustable rate mortgage which typically have even lower rates than fixed rate mortgages.
- Take Cash out of your home: Because you have paid down some prince by making monthly mortgage payments, earned home equity because of rising values, and your credit should have improved its possible there is room to take cash out of your home with a cash out refinance. Even better, depending on the loan-to-value and how low interest rates still are you can possibly keep your payment in line with what you are already paying and have cash to make home improvements, invest in a second home, or use how you wish. When considering this option, make sure to speak with your financial advisor or a mortgage professional.
Mortgage interest have continued to remain at all time lows but have increased slightly in recent weeks. To explore your options speak with an experienced mortgage broker. Elite Financial in Westlake Village, CA has over 25 years of experience and financed thousands of home loans.
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