Are you thinking about refinancing your mortgage? When you refinance a mortgage,you are replacing your existing mortgage with a new mortgage in order to acquire a better interest terms and rate. In order to create a new loan, the first loan must be paid off. Refinancing is a great option for borrowers with an excellent credit history, but is not always a beneficial option for borrowers with less than perfect credit. Here are some reasons to refinance your mortgage:
Acquire A Lower Interest Rate
One of the biggest reasons that people choose mortgage refinance is to lower the interest rate on their existing loan. Throughout the past few decades, borrowers considered refinance worth the money when their interest rates were reduced by at least 2%. However, a large percentage of lenders recommend that even saving 1% on your interest rates is beneficial enough to refinance. When you lower your interest rate, you can increase the rate at which you build equity in your home.
Shorten The Term Of The Loan
Mortgage refinances can be particularly advantageous when interest rates drop. In such circumstances, borrowers can replace an existing long-term loan with a shorter term loan. A shorter term loan could be a wonderful option for saving you money.
Switching Between Adjustable-Rate and Fixed-Rate Mortgages
Generally, adjustable-rate mortgages (ARM) begin with lower rates than fixed-rate mortgages. However,after a certain period of time, ARM rates increase to levels that are much higher than most fixed-rate mortgages. When the rates begin to increase, refinancing from an ARM to a fixed-rate mortgage could keep interest rates low and prevent stress over future rate increases.
When interest rates are falling, refinancing from a fixed-rate loan to an ARM could be an excellent option for borrowers. For borrowers who anticipate moving into a new home in the next few years, this could be a great option. Switching to an ARM could reduce interest rates and monthly payments when interest rates continue to drop.
Another major reason that people refinance their mortgages is to consolidate their debt. When done wisely, replacing a high interest mortgage with a lower interest mortgage is a great way to free up some cash. However, the borrower must remain aware of their spending habits and make wise financial decisions. The reality is that people who have acquired high interest debt from credit cards or car payments are less likely to change their habits even after mortgage refinance. It’s important to remember the fees associated with refinancing as well as the loss in your home’s equity. Refinancing may not be the right option for people who constantly rack up high interest debt.
If you are interested in learning more about mortgage refinancing, contact our mortgage brokers today. We approach our business decisions with honesty so that we can help you make the best financial decision for your lifestyle. We understand the ins and out of mortgage refinance, and we can help to find you the best mortgage for your needs. Call our mortgage advisors today to see how we can help you.