4 Reasons to Refinance Your Mortgage

More often than not people refinance their home to land a lower interest rate and decrease their monthly payments. If you’re in the midst of deciding whether to refinance your mortgage, don’t forget to consider these 4 perks of refinancing.

1. Lower your interest rate

Like mentioned before, this is the primary reason people sway towards refinancing their home. Interest rates have been decreasing which may mean you could save hundreds to thousands of dollars over the course of your loan period if you decide to refinance your mortgage.

A lot of times a lower interest rate means lower monthly payments. Lower payments mean more cash you can be designating elsewhere like into your savings or investments.

2. Shorten your length of your loan

If you have a 30-year loan you may be able to refinance into a 15-year loan period. When doing this, you may discover with the low interest rates the 15-year monthly loan payment is not much larger than the 30-year loan payment you’ve already been making.

Enter your information into a mortgage calculator to see the difference between 15-year and 30-year monthly loan payments. If the calculated amount is feasible for your financial situation, then consider contacting your lender.

3. Switch from an ARM to a fixed rate

If you’re looking to have a little more stability in your life, refinancing from an adjustable-rate mortgage (ARM) to a fixed-rate loan may be your opportunity. Some people will change from an ARM to ARM as soon as their rate is about to change. Either way, if you’re looking to change the type of loan you’re in, a refinance will allow you to do so.

4. Cash-out on your home’s equity

If you have equity in your home you can use a refinance as an opportunity to get cash. Taking cash means you’re opting into a higher mortgage to receive a one-time cash payment from the equity currently available in your home.

Many people take advantage of the cash-out refinance because they can use the money for pretty much anything, including consolidating their debt. A cash-out refinance will give you the money you need to pay down your higher interest debt first, such as credit cards or student loans, leaving only your new mortgage to be paid. This is advantageous when the interest rate on your other debt is significantly higher than the interest on your mortgage.

If you don’t have any debt to consolidate, you can use the money you receive for just about anything. So if you want to invest it, save it, or make renovations, the money is yours to use as you please.

Options are available

When you’re deciding whether to refinance your mortgage or not, don’t worry if you have little or no equity in your home. There are programs available which will allow you all or most of the perks of refinancing, just ask your lender.

Why did you refinance your mortgage?