If you are a homeowner and are interested in changing mortgage companies, finding a lower interest rate, or reducing monthly payments, refinancing is a viable option. A refinance allows you to obtain a new mortgage so that you can accomplish other financial goals. Refinancing is a suitable option for many people and should generally only be done if you have equity in your home.
There is no right time to refinance your mortgage; only when it makes the most financial sense to do so. For some, refinancing is a great way to tap into a lower interest rate, but for others, with bad credit, refinancing is a bit risky. It is important to understand how refinancing will affect your current loan and financial situation. There are several reasons you might choose to refinance your home’s mortgage.
The Benefits of Refinancing Your Mortgage
- Increased flexibility: Refinancing is a great way to increase your spending flexibility. With a lower mortgage payment, perhaps you can afford to take a vacation or save for an upcoming family event, like a wedding. Refinancing can also give you flexibility by allowing you to tap into a large sum of money in order to pay medical expenses, consolidate credit card debt, or buy a new car.
- Lower Rate: The most common reason that people refinance their mortgage is to get a better rate. It is important not to get too hung up on this notion, as restructuring your current home loan and beginning a new one, can incur additional fees. Refinancing is the best option if these extra fees do not damper the savings by having a lower interest rate.
- Renovations: Another option for many homeowners is refinancing their mortgage in order to take out a construction loan to pay for renovations on their home. This way you only pay interest on the amount borrowed as building progresses.
- Home Equity: Chances are, your home value has appreciated since you bought it. This means if you originally spent $200,000 on your home, but its current value is $400,000, there is now $200,000 of equity in your home. Refinancing your current home loan with a home equity loan, can help you tap into that extra money.
- Defaulting: Many people may choose refinancing when they are in danger of defaulting on their current loan. This happens when people have borrowed more than they are able to pay back, and struggle to make their mortgage payments. There is no shame in this at all, and a finance broker can offer you options when it comes to refinancing your home loan to make it more manageable.
While refinancing can be a great option for many people looking to tap into their home’s equity or access a lower interest rate, it is not a one-size fits all solution. If you plan on selling your home in the next few years, have bad credit, or refinancing will put you into a longer term loan with a potentially higher interest rate, you may want to hold off. The best way to determine if refinancing is right for you and your family is to speak with a qualified mortgage lender.
If you are looking to adjust your financial goals through refinancing your home loan, it is important to understand all your options. Contact us today for questions on refinancing your home’s mortgage, or to speak with someone about applying for a mortgage for your new home. We offer a variety of services to help you fulfill your home buying or refinancing goals. With over 50 years of experience in the mortgage industry, you can rest assured that you are working with a professional and reliable lending team.