When does it make sense to refinance your home? This is one of the most important mortgage questions to ask if you want to save money long-term. There are several different options, and these options can be beneficial:
Debt consolidation
If you have large balances on high-interest credit cards or other loans, it may be to your advantage to consolidate multiple payments into a single monthly payment. By rolling all your debt together into a fixed-rate mortgage, you could save some interest over time, and your combined payment may be less than making individual payments to each creditor. It’s a more effective way to manage your budget.
Refinancing and adding to your total mortgage loan may mean that you need to extend the term of your loan. It’s important to get help from a financial advisor who can explain advantages and disadvantages and what is the right choice for you.
Payment reduction
If you already have a fixed mortgage but can qualify for a lower interest rate, refinancing may be worth the effort. In addition to reducing your monthly payment, it can dramatically reduce the total amount you pay over the life of the loan.
Keep in mind that when you refinance, new closing costs and other fees may still apply.
Switch from an Adjustable Rate to a Fixed Rate Mortgage
If you currently have an Adjustable Rate Mortgage (ARM) and your adjustment period is near, you may want to switch to a Fixed Rate Mortgage (FRM). Switching to an FRM will allow you to avoid the stress of substantially higher monthly payments that may become unaffordable. Plus, you’ll have greater peace of mind with a rate that won’t fluctuate over time.
Repay More Quickly
If you can actually afford to pay a little more each month than you’re currently required to pay, then you may benefit by refinancing to a shorter loan term. By switching from a 30-year loan to a 20- or 15-year loan, your payment will increase, but the total amount that you pay over the life of the loan will be substantially less.
What mortgage questions do you have? Ready to see if you qualify to refinance your home? Give us a call at 888-873-2640 or visit our online Mortgage Center.