Reasons to Refinance

Four Good Reasons to Refinance your Mortgage

Deciding to refinance your mortgage can be an effective tool in saving you money over time. But you still have to go through the same approval process as you did when you initially bought your home, so you want to make sure it’s the right choice. There are many reasons that refinancing may make sense for you. Here are four of the more popular reasons for your consideration.

Switching to a Fixed Rate

If your current mortgage has an adjustable interest rate or you have an “interest only” mortgage, you may want to consider switching to a fixed rate in order to stabilize your payment. Or, if interest rates are lower now than when you purchased, you may want to lock-in to a low fixed rate.

Lower your Monthly Payments

There are different ways you could do this. You might switch to another loan type, take advantage of a lower interest rate or extend the length of your loan. You also may be able to pay points to lower the interest rate on your new loan.

Another thing to consider is your break-even point. You may be able to lower your monthly payment, but you will still need to pay closing costs, as you did with your first mortgage. To calculate a break-even point, divide the expected total cost of your refinance by the monthly savings on your loan payment. This tells you the number of months that it will take to recover the cost to refinance. Our experienced loan officers will be happy to help you with this analysis.

Pay off Your Mortgage Faster

If you refinance from a 30 year to a 15 year mortgage, you will likely be obligated to make higher monthly payments over the entire life of the loan. If you can afford higher monthly payments, then you should consider shortening your loan term. Reducing your loan term could help you achieve significant interest payment savings over the life of the loan.

Cash Out Equity to Consolidate other Debts

A Cash Out Refinance allows you to tap into the equity in your home. You can use this cash out equity to consolidate other debts such as a credit card balance or a car loan. If you do take cash out in addition to your existing loan, your new mortgage balance will be larger than the original.

If you have more questions, contact us or get started today.