Top Reasons to Refinance Your Mortgage
There are several reasons to consider refinancing a mortgage; switching to a lower interest rate is just one of many. Other reasons to refinance your mortgage include:
You can reduce the risks of an adjustable rate mortgage by switching to a fixed rate mortgage when you refinance. In so doing, you can make your monthly mortgage payments steady and predictable for the duration of the loan. They will be the same amount every month from that point forward.
Many homeowners choose to refinance their mortgages in order to liquidate the equity on their homes into cash. The equity that is cashed out can be used to pay off student loans, pay for current college costs or add upgrades/perform renovations to the home; these are just a few ideas. One of the most common uses for cashed out equity is adding a swimming pool.
Often, the reasons to refinance your mortgage could include consolidating consumer debt. If there is sufficient equity in the home, it may be possible to pay off credit cards and other consumer accounts, resulting in streamlined debt, easier monthly budgeting and a higher FICO score. However, it’s important to keep in mind the total cost of that debt by adding it into a 30-year mortgage payment.
As stated, one of the most common reasons for refinancing a mortgage is to secure a lower interest rate. Interest rate and loan amount determines the total cost that a borrower will pay. The lower the interest rate, the less the overall cost will be. Interest is calculated on a daily basis and usually paid back to the lender on a monthly basis.
Aside from lowering the interest rate, it is possible to lower your mortgage payment by refinancing your mortgage. Lowering a mortgage payment can be achieved by lowering the mortgage rate, lengthening the loan term, combining two or more loans or removing the mortgage insurance.
Remember: A mortgage refinance isn’t free. Sometimes, it has the same costs as a mortgage, including loan origination fees and appraisal fees. Nowadays, we do offer “zero fee” loans to many borrowers. Smart borrowers never enter into any loan agreement without considering all angles, including a refinance.
To discuss whether you should refinance, contact Home Loan Solutions today. We can explore all the reasons to refinance your mortgage and help you determine if now is the right time to take this step.