Refinancing. You hear the term in the media almost every day especially in this low rate environment. Refinancing means paying off your existing mortgage with a new one. Should you do it? Consider these five reasons why refinancing may be right for you.
1. You can lower your payments.
Interest rates are still low. Many experts recommend refinancing if you can get a rate that is at least one percentage point lower than your current one. A lower rate means lower monthly payments and saving tens of thousands of dollars in interest over the life of your loan. Calculate how much you will save every month by refinancing and compare it to the closing costs associated with your new loan. If you plan to stay in your home long enough to recoup those costs, refinancing makes sense for you.
2. You can shorten your loan term.
If you got a 30-year mortgage three or five years ago or longer, you might want to refinance with a new 15-year term. A shorter term means that a greater portion of your payment will be applied to your principal balance from the start, allowing you to pay off your loan faster.
3. You can switch to a fixed rate.
An adjustable-rate loan has many benefits. Many people opt for this because initially the rate is low and payments are affordable. However, many others love the certainty of a fixed payment. Switching to a low fixed- rate mortgage might give you the security of knowing that your payments will not increase over time.
4. Your credit has improved – to your advantage.
You might have bought your home when you had average credit or a short credit history. Now your score has improved and you may qualify for a lower rate.
5. You can get cash out.
With a cash-out refinance, you borrow more money than the outstanding mortgage and receive the difference in cash. You can then use this money to pay off high-interest debt, make repairs or remodel to increase the value of your home.
If you're thinking of refinancing, or want to know if it makes sense for you, contact one of our Mortgage Loan Officers. We're here to help.