Have you been considering refinancing your home due to interest rates beginning to drop? Here are five reasons you should refinance your house if you are still on the fence about it:
1. To Get a Lower Interest Rate or Monthly Payment
The most common reason people choose to refinance is to get a lower interest rate. If rates are lower now than when you initially bought your house and seemed to likely remain that way, then financing can help you save on interest when you look long-term into your mortgage. Lower interest rates can also result in a cheaper monthly payment which can be extremely helpful for your savings account.
2. Decrease or Extend Your Loan Term
If you got a new job, for example, or are just in a better financial state in general, you may want to refinance so your term is shorter. This will increase your monthly payments, but your mortgage will be paid off sooner. Doing this will save you more money in the long run as you end up paying less interest.
However, refinancing can be beneficial for the opposite reason as well. If you happen to run into some financial trouble and plan on staying in your home for an extended period, extending your loan term might be right for you. This will mean you are paying more interest as it will take you longer to pay off your mortgage, but your monthly payments will be lowered. This can make things easier on you financially for now, and in the future, you can always refinance again.
Depending on what your situation is, either extending or decreasing your term can be helpful for different people in different ways.
3. Cash-out Refinance
Another popular reason to refinance is to get some money out of your home right then and there, which is called a cash-out refinance. This is when you replace your old mortgage with a new, lower one and receive the difference in cash. This can be helpful for several reasons, especially if the mortgage and interest rate is significantly lower than your original one.
4. Moving from an Adjustable-Rate Mortgage (ARM) to Fixed Rate
Having an Adjustable-Rate Mortgage (ARM) means your interest can increase or decrease depending on what the market looks like at the time. Refinancing your home is an excellent opportunity to switch from an ARM to a Fixed Interest Rate. This means you have one solid rate for the eternity of your mortgage, regardless of what the market is doing. If interest rates are low, it may be smart for you to refinance and switch to a Fixed Rate if you don’t already have one.
5. To Buy Someone out
Depending on your situation, you might want to remove someone from your house title or mortgage. Maybe you are going through a divorce, own a property with a business friend, or you’re removing a co-signer. Whatever the reason may be, refinancing your home is an excellent way to do this with the plus side of also getting a lower rate.