Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance: the opportunity to obtain a lower interest rate; the chance to shorten the term of their mortgage; the desire to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa; the opportunity to tap a home's equity in order to finance a large purchase; and the desire to consolidate debt.
One of the best reasons to refinance is to lower the interest rate on your existing loan. Even a .25 % reduction could be worth it to refinance. Reducing your interest rate can save you money every month on your payment. Some people will also take this opportunity to shorten the term of their loan which will save you a lot of money in the long run.
While adjustable rates often start out offering lower rates than a fixed rate mortgage, there is always the chance of that rate going up eventually. Converting to a fixed rate when rates are low can erase the fear of your adjustable going up in the future. Conversely, converting from a fixed-rate loan to an adjustable rate can also be a sound financial strategy, particularly in some cases. For instance, you're starting a new business and need lower payments now while you're growing. Or your going to be getting pay increases in the future and can handle a higher payment later on, but want a lower payment now. Give us a call and we will custom tailor a loan that makes the most sense for your situation.
Homeowners often access the equity in their homes for many different reasons. This is normally the best way to borrow money for things like home improvement, paying off high interest credit cards, or sending your kids to college. Doing home improvements is a great way to increase the value of your home as well as making your home look the way you always wanted. When you pay off debt, you will most likely lower the rate you're paying as well as save money every month!
Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity more quickly. When used carefully, it can also be a valuable tool in getting debt under control.