With interest rates being at an all time low, people are refinancing their homes to lower their monthly payments. In the past, many people would take their equity out during refinancing to pay off large sums of debt or do home improvement. However, according to a recent report from Freddie Mae, there is an increase in the rate of people putting money into their mortgage (known as cashing-in) rather than taking it out. Why would people decide to put their savings into their mortgage loan? Well, you’ll be surprised to know that it’s probably one of the best investment decisions you’ve made in awhile.
Five Reasons to Cash-In During Refinancing
- 1. Lower your monthly payment.
The less money you have as your principal, the less money you will have to pay per month.
- 2. Score a lower interest rate.
Lenders will consider your financial situation when determining your interest rate. Having extra money to place on your home loan is impressive to lenders and they’ll want to reward you with a lower interest rate.
- 3. Avoid mortgage insurance premiums.
If you’re able to put in enough to give you a cash to value ratio of less than 75%, you will avoid otherwise costly mortgage insurance premiums.
- 4. Better investment than savings
Investing your money into a loan is wiser choice during this low interest rate period since they are also low for other investment options such as CDs, money market and IRAs.
- 5. Pay of your loan quicker.
The more money you put down now the less you’ll have to pay later.
Photo Courtesy of: Robert S. Donova on flickr
February 9th, 2010 at 11:00 pm
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor