When Does it Make Sense to Refinance?
There are times when it is advantageous to refinance your home after you have taken out a loan to purchase your property. Here are some of the reasons why you should or shouldnâ€™t refinance and when to do it:
Securing a Lower Interest Rate
One of the best reasons to refinance is to lower the interest rate on your existing loan. Reducing your interest rate not only helps you save money, but it increases the rate at which you build equity in your home, and it can decrease the size of your monthly payment.
Shortening the Loan’s Term
When interest rates fall, homeowners often have the opportunity to refinance an existing loan for another loan that, without much change in the monthly payment, has a shorter term
Converting Between Adjustable-Rate and Fixed-Rate Mortgages
While ARMs start out offering lower rates than fixed-rate mortgages, periodic adjustments often result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to a fixed-rate mortgage results in a lower interest rate as well as eliminates concern over future interest rate hikes.
Tapping Equity and Consolidating Debt
Homeowners often access the equity in their homes to cover big expenses, such as the costs of home remodeling or a child’s college education. These homeowners may justify such refinancing by pointing out that remodeling adds value to the home or that the interest rate on the mortgage loan is less than the rate on money borrowed from another source.
Many homeowners refinance in order to consolidate their debt. At face value, replacing high-interest debt with a low-interest mortgage is a good idea. Unfortunately, refinancing does not bring with it an automatic dose of financial prudence.
The Bottom Line
Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity more quickly. When used carefully, it can also be a valuable tool in getting your debt under control. Before you refinance take a careful look at your financial situation, and ask yourself: How long do I plan to continue living in the house? And how much money will I save by refinancing?
One of our lending officers would be more than glad to talk to you and take you step by steps on whether or not refinancing makes sense for your or not. Educating clients and lending a helping hand is what has allowed HomeWay Mortgage to become one of the leading local mortgage companies in the area. We look forward to assisting you with all of your lending and refinancing needs. Call Us, stop by our office for a free, personal consultation with one of our team member or find us at www.homewaymortage.com!