Another reason to do a cash-in refinance is to shorten or lengthen your loan term. If you shorten your loan term, you end up with a lower rate compared to loans that have longer terms because investors don’t have to project inflation as far out. You also save thousands on interest by paying off your mortgage sooner.
On the other hand, going with a longer-term mortgage means the opportunity to have a lower monthly payment. The trade-off is a higher interest rate because inflation is being projected further. You also pay more in interest by taking longer to pay the mortgage off. However, if you need the money you’re putting into your house for other things, this is a good option.
Adjustable-rate mortgages (ARMs) have the advantage of a lower interest rate relative to current market rates because the adjustable nature means that investors don’t have to try and guess where inflation is going to be because it can always adjust up or down after the teaser period. People might even get into ARMs because they plan to move before the adjustment happens.
However, if you find yourself staying in your home longer or interest rates are trending up around the time of your adjustment, consider a fixed-rate mortgage. With a fixed-rate, you would have payment certainty for the length of the term. A cash-in refinance can make sense in this scenario.
To Get Rid Of Mortgage Insurance
Conventional and FHA loans have forms of mortgage insurance that you have to pay if you make less than a 20% down payment when you buy your home.