Many homeowners are a little intimidated by the idea of refinancing. The typical school of thought is that getting a mortgage is difficult enough. Why go through the process again?
If you talk to the pros, you’ll find that refinancing is quite simple and might save you some cash. It’s also a way to tap into your home equity, which is part of the reason you chose homeownership over renting, right?
Today we’re going to banish your bewilderment about refinancing and give you the info you need to conquer this financial decision.
What Is a Mortgage Refinance?
Refinancing means paying off an existing mortgage and replacing it with a new one. If you decide to refinance your mortgage, you’ll apply for a new loan. Instead of using your new loan to purchase a home, you’ll use it to pay off your old one.
Why Should I Refinance My Mortgage?
Although it’s not the best choice for everyone, several reasons might make refinancing worthwhile. Here are the top four:
- Secure a lower interest rate
If current interest rates are significantly lower than when you purchased your home, you might be able to refinance into a mortgage that takes advantage of this difference. Most lenders recommend refinancing if you can lower your interest rate by at least 2%, although some say that a 1% reduction is enough to reap financial rewards. - Switch from an adjustable-rate mortgage to a fixed-rate mortgage
If interest rates are plummeting, you might want to get out of your ARM and grab that low rate for the duration of your mortgage. - Shorten your loan term
Are you in a better financial position than when you secured your 30-year mortgage? Do you have an opportunity to get a lower interest rate? If you answered “yes” to these questions, consider decreasing your loan term to 15 years to save thousands of dollars throughout your mortgage. - Take advantage of your equity
Some homeowners opt for a cash-out refinance and use the equity in their home for hefty expenses. While we don’t recommend you use the money from refinancing to take fancy vacations or do other frivolous things, it might help you fund a renovation project that will add value to your home.
Contact Us Today!
Want to learn more about refinancing from the experts? Contact us at, MortgageDepot, to see if refinancing your mortgage will help you meet your financial goals!
Connect with one of our loan consultants today to learn more!
