1. You Can Get a Lower Interest Rate
Naturally, refinancing is more popular when interest rates drop. If rates are lower on average than when you secured your original mortgage, refinancing could help you reduce your monthly payment and build equity faster. However, the difference may not always be worth your up-front expenses. Working with a lender, together we can determine if refinancing will benefit you.
2. You Can Change Mortgage Types
Refinancing gives you the opportunity to change the type of mortgage product you are in. For example, if you’d like to switch from an adjustable-rate mortgage to a fixed-rate mortgage, or vice versa, refinancing gives you the chance. Remember, fixed-rate mortgages protect you from rising rates and volatility, but ARMs give you a chance to save when interest drops.
3. You Can Shorten Your Loan Term
Taking advantage of interest rate drops may allow you to reduce the length of your mortgage. Maybe you won’t change your monthly payment, but your home could be completely yours at the end of a 15-year term instead of 30 years. Whether or not a shorter loan term will be profitable depends on how much you’ve already paid and how long you’ll have to go. We can help you determine if refinancing benefits you.
4. You Aren’t Moving
Refinancing is best for those who plan to live in their homes for at least another five years. If you think you’ll move before then, refinancing probably isn’t worth it either financially or in terms of the extra hassle you’ll be dealing with before selling.
5. Cash-Out Refinancing Makes Sense for You
In most cases, you keep the same balance when you refinance your mortgage, but cash-out refinancing allows you to get a new loan for more than you owe. You can use the difference (paid in cash) for home improvements or any other financial need. If you need to increase your cash flow and you’ve built enough equity to take advantage, cash-out refinancing could be a great option.
If there ever comes a time when refinancing your mortgage is an attractive proposition, think back on these discussion points carefully. When you’d like to weigh your options and see if refinancing will put you ahead financially, let your Envoy loan officer know how they can help.
A special thanks to Mike Thompson and Steve Gouveia at Envoy Mortgage for contributing their insights into the housing market. For additional information or to get your preapproval, call 610-401-4165