It’s no secret that today’s interest rates are at historic lows. What you might not know is that as a homeowner, you may be able to take advantage of these historically low rates by refinancing your current mortgage.
Depending on factors including the age of your existing mortgage, amount of equity, and your current interest rate, a refinance could result in a lower monthly payment and significant cost savings over the life of your home loan. Keep reading to learn more.
IS NOW THE RIGHT TIME TO REFINANCE?
In general, if refinancing will help you save money, pay off your mortgage faster, or tap into your home’s equity to reach a specific financial goal, it’s a good decision. With current rates this low, even homeowners with fairly new mortgage loans might be able to benefit from refinancing.
It could be time to refinance if:
- Your adjustable rate mortgage payment is increasing
- Your current interest rate is higher than today’s rate and you want a lower payment
- You want to “cash out” the equity in your home to use for expenses such as college tuition, a vacation property, or home improvements
WHEN TO REFINANCE YOUR MORTGAGE
People refinance for many reasons. Perhaps you want more manageable monthly payments, or to pay off your mortgage more quickly. Maybe you’d like to take advantage of lower rates, or you want to get cash out for expenses.
Here are a few times when it may be good idea to talk with your lender about a mortgage refinance:
- Interest rates have dropped, and you can lower your monthly mortgage payment. If current interest rates are lower than the rate you are paying on your mortgage, refinancing could lower your monthly payment.
- You want to convert your home’s equity to cash. If you have enough equity in your home, a cash-out refinance can allow you to turn that equity into cash. You might use the funds to pay off debts, fund a retirement plan, purchase an investment property, make home improvements, or cover the costs of other large expenses like college tuition.
- You’re ready to stop paying monthly mortgage insurance. If you’re currently paying mortgage insurance, refinancing may allow you to tap into your home’s equity to eliminate the need to pay this monthly expense.
- You want to shorten your mortgage term. You can use a refinance to shorten the term of your mortgage, which allows you to pay off your mortgage sooner and potentially save thousands of dollars in interest over the life of the loan. The shortened term may result in a slightly higher mortgage payment.
- It’s time to switch from an Adjustable-Rate Mortgage (ARM) to a Fixed-Rate Mortgage. If you have an adjustable-rate mortgage, refinancing to a fixed-rate loan can lock in a low interest rate for the life of the mortgage, which may result in significant cost savings. Plus, you can rest assured that your monthly payments won’t rise if rates increase in the future.
Whatever your reason is for refinancing, it’s important to be clear on your goals before you begin the process. Share what you’d like to achieve with your mortgage professional so they can help you choose the best refinance solution to reach your goals.
READY TO TAKE THE NEXT STEP?
Let’s get started together. As mortgage professionals, we have helped homeowners with many different needs. Together, we can discuss your situation and see if now is the right time for you to refinance.