When it comes to your mortgage, you should always be looking for a leg up. You should always be looking for a way to improve your situation.
And for many homeowners, this means refinancing.
When you refinance, you’re leaving your old mortgage behind for one with more favorable terms.
If you’re unsure if this is a good idea, here are some of the many benefits of going down this path:
1. A Lower Mortgage Rate
This is the number one reason to refinance your mortgage. When you secure a lower rate, you’re able to reduce your monthly payment. You’re also able to reduce the amount of money you pay in interest over the life of your loan.
With mortgage rates hovering around all-time lows, now’s the time to consider refinancing. That’s especially true if your current mortgage rate is on the higher side.
2. Lower Monthly Payment
This goes hand in hand with point #1 above. When you secure a lower rate, it will reduce your mortgage payment.
Of course, there are exceptions to this rule, such as:
- If you opt for a shorter term, such as 15-years instead of 30-years
- If you use the refinance as an opportunity to consolidate debt
- If you have to use any equity to pay off a home equity loan or line of credit
Once you do the math, you’ll better understand if you’re able to lower your monthly mortgage payment. If you can, it’ll take some stress off your finances.
3. Shorten Your Term
Even though this may result in a higher monthly payment, you won’t have it for nearly as long.
For example, if you secured a 30-year mortgage five years ago, you still have 25 years left of payments.
However, if you refinance to 15 years, you can knock 10 years off your repayment period. This allows you to become mortgage free sooner than expected, which is a real boost to your budget and finances.
4. Borrow Money
If this is something you’re interested in, talk to your lender about a cash-out refinance. This allows you to borrow against your home’s equity to obtain funds that you can use for things such as medical expenses, home improvement projects, travel, and more.
Just remember that the amount you borrow is added onto the principle that you owe. As a result, your monthly payment will be higher.
These are just a few of the many benefits associated with refinancing your mortgage. If you’re interested in heading down this path, here are some basic questions to answer:
- What is your current mortgage rate?
- What is your current monthly payment?
- How many years are left on your mortgage?
- What interest rate do you qualify for?
- Are you interested in refinancing as a means of borrowing money or consolidating debt?
By answering these questions—among any others that are on your mind—you move yourself closer to making an informed and confident decision.