Reasons to refinance: lock in on what's important
Is it time to refinance your home loan? Before you rush to apply, take time to discover a thoughtful response – and ask yourself a few more questions along the way.
Simply put, refinancing restructures your mortgage debt, usually at a lower interest rate and different term than your current loan. In recent years as interest rates dipped to all-time lows, many homeowners locked in lower rates by refinancing.
But a lower rate is just one reason to refinance. Your goals play a big role in the decision, so be sure to clarify what you hope to accomplish.
- Do you want a lower interest rate?
- Do you want to reduce your monthly payment?
- Are you planning to consolidate your debts? (home equity loan, high-interest credit cards)
- Is it time to stop paying private mortgage insurance (see below)?
- Do you want a 15-year mortgage? Are you ready for a 10-year mortgage?
- Perhaps you want a fixed-rate mortgage or an adjustable rate mortgage (ARM)?
You will also want to think about timing and circumstances. How long do you intend to remain in your home? The closing costs associated with refinancing are definitely a consideration if you plan to move soon.
Is your credit rating stable, or has it improved since you originally bought your home? Have you incurred significant debt that may have an impact on your ability to secure the best interest rate possible? Because circumstances are unique, it may be smart for you to wait until auto loans are paid or to consolidate high-interest credit card debt into your refinanced mortgage. It all depends on your full financial picture.
Some homeowners owe less on their mortgage than their home is worth. They may choose to refinance in order to use the equity as cash to achieve other financial goals.
As you can see, there are many valid reasons to refinance your mortgage. If you're wondering whether it's time, contact one of our mortgage representatives at 866-596-1501 for a consultation.