Like many homeowners, you probably want a lower interest rate and a shorter mortgage. If you are considering refinancing your mortgage, it can take a lot of effort and time to begin the process. While there are some not-so-pleasing aspects of refinancing, it can be a good financial move if your mortgage payment is lowered.
Under the right conditions, refinancing your home can certainly benefit you in the long run. It all depends on your particular financial goals. Let’s take a look at some of the reasons why refinancing is a good idea:
You can get a lower interest rate. Since interest rates are at a record low right now, you can get 30-year and 15-year mortgage rates far below 5%. This is one of the best incentives to refinance because it not only lessens your monthly payment; it also allows you to build equity in your home quicker. You can save thousands of dollars in interest by refinancing, and you can pay off your mortgage debt faster. According to lending companies, reducing your interest rate by 1% is an incentive to refinance.
You can shorten the term of your loan. If you switch from a 30-year mortgage to a 15-year mortgage, the shorter loan can fit into your budget. Your monthly payment may only increase by a few hundred at the most, and this may be a feasible option for your household. You can use a mortgage calculator to estimate your new payment.
You can lower your monthly payment. If your goal is to have an extra couple of hundred dollars every month for savings, investments or vacations, refinancing at a lower interest rate can accomplish this. You can also save a great deal of money in interest. Keep in mind that lowering your monthly payment can add years to the term of your loan, but it can be extremely helpful.
You can get a fixed-rate loan. Your adjustable-rate mortgage can be refinanced for a lower interest rate, and you can lock into this rate for years to come. You can also plan a fixed payment with more ease every month.
You can cash out your home equity. This can be a savvy move in certain instances. You may want to cash your home equity to invest and start a business. Or you may simply want some money to pay for other expenses or manage debt.
You should also take into consideration the fact that refinancing involves closing costs and other fees. It may cost thousands for a new mortgage, but only you can determine if the costs of refinancing is worth it in the long run. Also, if you are considering moving anytime in the next few years, refinancing will probably not be the best option.
Refinancing means that you need to know the value of your home. You can get a free home valuation report from Neighborhood IQ by clicking here to find out your home’s worth to help you decide if refinancing is a good way to go. It is important to weigh the pros and cons of your unique situation. With careful planning along with knowing the value of your home, refinancing could turn out to be one of the best financial decisions you have ever made as a homeowner.