If you have an adjustable rate mortgage, refinancing could get you a low fixed-rate that will protect you from rate increases and save you money over the life of the loan. Refinancing may also let you take cash out of your home for improvements or educational expenses. It may also lower your monthly payments 1 and overall monthly debt, increasing your cash flow. If you’re currently paying private mortgage insurance (PMI), refinancing might eliminate that monthly cost thanks to the equity you’ve built up.
A Finance My Home Mortgage Loan Originator can help you decide if it’s the right time for you to refinance.
Benefits of Refinancing
Refinancing is often motivated by lower interest rates which help lower costs over time. But there is no “one-size-fits-all” solution. Here are a few reasons you might benefit from refinancing your home.
When rates fall, it’s tempting to refinance. A common rule is that a 1% drop in rates will make it worthwhile, but this varies. For a homeowner with a $300,000 balance, a rate reduction of even less than one percent can lower the monthly payments by a couple hundred dollars and cut long-term interest expenses by hundreds of thousands.
Replace a longer term loan with a shorter one and you’ll be out of debt sooner. This is a good option if you’re okay with higher payments.
Lower Interest Costs
Locking in a better fixed-rate is great, but it is not the only way to lower your bills. Adjustable Rate Mortgages (ARM) generally offer lower rates in the early years followed by higher rates later. If you plan to be in the house for just a few years, an ARM may make a lot of sense.
Borrowers may use their home’s equity to pay for major purchases or to make home improvements.
A Mortgage Loan Originator can help you decide if it makes financial sense to refinance. Contact us today to learn about your options.