Get more from the home you own.
Your home is your biggest financial asset. Learn when refinancing, tapping equity, or dropping mortgage insurance actually pays, and when it doesn't.
1. The rate refinance
A common rule of thumb says refinance when you can drop the rate by 1% or more. What matters more is your break-even month: total refinance costs divided by monthly savings. If you will keep the loan well past that month, even a smaller drop can pay off.
4. Removing PMI
Once your balance reaches 80% of your home's original value, you can ask your servicer to cancel private mortgage insurance (PMI), and it ends on its own at 78%. A higher home value can also help after two years.
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Four ways to make your loan work harder.
Owning a home gives you options a renter does not have: refinance for a better rate, tap equity, pay down faster or drop mortgage insurance. Each one has a cost and a payoff point, so the right move depends on your balance, your rate and how long you will stay.
Start with the number that matters most: the rate on your current mortgage. If it is well above today’s rates, a rate refinance may pay off quickly. If it is low, keep it, and use a HELOC or home equity loan instead of a cash-out refinance when you need cash.
If you put less than 20% down on a conventional loan, check whether you can remove PMI. And if you are in Texas, make sure your homestead exemption is on file; it can save about $1,540 a year in school taxes alone.
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Questions, answered.
When does refinancing make sense?
When you expect to keep the new loan past the break-even month: total refinance costs divided by monthly savings. A new 30-year term can also add years of interest, so compare total cost.
HELOC or cash-out refinance?
If your current rate is low, a HELOC or home equity loan usually costs less because it leaves your first mortgage alone. A cash-out refinance fits best when today’s rates are near or below your current rate.
Can rising home values help me drop PMI?
Often, yes. Under Fannie Mae rules, a new valuation can end PMI at 75% loan-to-value after two years or 80% after five. Your servicer sets the process.