When Does Mortgage Refinancing Make Sense?
As you’ve heard us mention on our blog in the past, a home is typically the single largest purchase most people will ever make. That’s why it’s so important to search for the best home mortgage loan. Oftentimes, mortgage refinancing is a great solution to securing an even better financial fit for your individual mortgage needs. Refinancing your mortgage simply means paying off your existing home mortgage loan and replacing it with a new mortgage loan. If you can save money on your existing mortgage by refinancing, it could be a smart move for you. Read on to learn when refinancing your mortgage makes the most financial sense.
When is mortgage refinancing a good option? Here are five reasons to refinance.
1 To lower your interest rate.
Securing a lower interest rate on your mortgage loan is one of the best reasons for mortgage refinancing. When interest rates drop, it’s time to start considering mortgage refinancing. Keep in mind that closing costs and fees can add up quickly and vary greatly by lender. Do the math to be sure that the reduction in interest really outweighs the costs. If you don’t plan on staying in your home for long, refinancing may not be the best option for you. You’ll need to calculate your break-even point.
2 Refinancing from an Adjustable Rate Mortgage (ARM) to a fixed-rate mortgage.
ARMs usually come with a lower initial introductory rate than a fixed-rate mortgage, but that can change quickly. Mortgage rates can and do fluctuate and are impacted by many different factors. Refinancing to a fixed-rate mortgage can provide you with the security of having a set monthly payment for the life of the loan. This can be especially beneficial in a rising interest rate environment.
3 Refinance to reduce your term and pay off your mortgage faster.
Your financial situation or income may have changed since first applying for your mortgage. You may now have the ability to pay more each month and pay down your mortgage even faster. This is a great reason for mortgage refinancing. If you can combine that lower term with an even lower rate, it’s a win-win!
4 To get a cash out mortgage refinance.
Some homeowners opt for a cash-out mortgage refinance as an alternative to a home equity loan. You may wish to pay down high-interest credit card debt or make needed home improvements. If you are in the market for a home equity loan, give some thought to mortgage refinancing. If mortgage rates have gone down since you first applied for your mortgage, a cash-out refi might be a better option to get the cash you need.
5 Your credit score has improved since you first applied for your mortgage.
Mortgage rates may not have gone down much, but perhaps your credit score has significantly improved. While you may not have qualified for the best mortgage loan rate initially, you may now. It’s worth exploring the possibilities to save on interest. On the other hand, if your credit score has gone down, mortgage refinancing might not be the right answer for you.
Refinancing your mortgage
Are you ready to consider your refinancing options? Learn more about mortgage refinancing online at Spirit Financial Credit Union. We offer competitive mortgage rates, flexible terms, affordable fees, and a fast decision-making process.