There are many good reasons people choose to refinance their home. For some people they want
the option of putting their equity to other uses. For others, they’re looking for a lower monthly
payment and a mortgage that is more easily managed. Still others want to take advantage of
lower interest rates, which means that they will be paying less money out over the life of the
loan. Taking advantage of a refinance isn’t difficult – it’s a simple matter of speaking with your
loan officer – so let’s take a lot at the real reasons people choose to refinance, as well as some
FHA payment calculators that might help you make the best decision for you.
The Reason to Take Advantage of Refinance Options
When you buy a home you do so with two goals in mind. First, you want a place to live. This is
especially true when you go through the FHA, which requires that you live in the home you
purchase. A second goal is the investment. As you pay down the mortgage you are going to build
up equity, which means that eventually the home will be worth more than you owe. At that point
you have money that you can use for other purposes. At this point many people get a cash-out
refinance. A smart investor takes that money and rolls it into other investments. In fact, that is
exactly what many homeowners do. Their home becomes their key to a greater investment
Another excellent reason to refinance your home is to reduce the interest rate that you are
currently paying. The real estate market constantly fluctuates – the rates go up and they go down.
If the rates drop and you are in a place where you can refinance, you would be wise to take
advantage of it. If your rate on your mortgage is lowered even a half percent, you will save
thousands of dollars over the life of the loan.
Of course, cashing out and reducing the interest rate aren’t the only benefits of a refinance. Many
people refinance to reduce the monthly mortgage payment or to change the type of mortgage
that they have. It’s very common for a homeowner to acquire a loan that has an Adjustable Rate
Mortgage (ARM). With an ARM the interest rates fluctuate with the market, giving the
homeowner a monthly mortgage payment that can change. Eventually the homeowner may want
something more stable. When he does, he refinances into a fixed mortgage which has a set
For some homeowners, a refinance may be the key to consolidating their debt. They use the
cash-out option and pay off other debts, then simply continue to pay on the new refinanced
mortgage. For them it is much easier to handle the one monthly payment than it is to juggle
multiple payments every month. Plus, they are no longer paying high interest rates on other
forms of debt.
Depending on your situation, you will want one of three different refinance types offered by the
FHA. The first is the cash-out refinance, which can be acquired by people with conventional loans or federally insured loans. If your loan is conventional you will roll it into an FHA loan.
The streamline refinance is another option. This is for people with existing FHA loans that want
to refinance to lower their monthly mortgage. It comes with a unique set of requirements, but if
you meet these requirements it can be fairly easy to acquire. The last option is the Short
Refinance, which is for those people who are upside down in their mortgage and who want to get
back on top. In order for this loan to work the lender has to be willing to forgive about 10% of
the existing loan. This option will need to be discussed in detail with your professional team.
Is Refinancing Worth it? Consult an FHA Payment Calculator
Before you discuss your refinance options with your loan officer, you may want to plug in some
numbers. There are multiple FHA Payment Calculators, although technically they are known in
different terms. The first is the mortgage calculator. This will help you determine the amount you
will be paying monthly for the life of the loan. You can find an FHA Payment Calculator (also
known as the FHA Mortgage Calculator) on www.FHA.com. There is a link near the top of the
page that will take you directly to it. A second calculator that you will be interested before you
refinance is the refinance calculator on www. FHA.gov. This calculator will help you determine
what you will save if you choose to go ahead with a refinance. Savings are always a good thing.
While every person has a different reason for refinancing, the reasons listed are some of the most
common. Don’t sit on a mortgage that isn’t working for you when there may be a better option on
the table. Now is the time to seize the day and take advantage of what is waiting for you.