When does it make sense to refinance? Refinancing is an option in a variety of circumstances – and in some situations; it may help you save money long-term. Here are a few ways that refinancing can be beneficial:
Debt consolidation
If you have several large balances on high-interest credit cards or other loans, it may be to your advantage to consolidate everything 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. That way, your monthly budget will be more manageable.
Refinancing and adding to your total mortgage loan does mean that you may need to extend the term of your loan, however. So it’s important to get help from a financial advisor who can explain all the advantages and disadvantages, and help you decide whether this is the best choice for you. Use our calculator to see if debt consolidation is a good option for you.
Payment reduction
If you already have a fixed mortgage, but can qualify for a lower interest rate, it may be worth it to you to refinance. Doing so will not only reduce your monthly payment, but can dramatically reduce the total amount that you pay for your home over the life of the loan.
Keep in mind that when you refinance, new closing costs and other fees may still apply. For details, and to determine whether you may be able to obtain a lower rate use our refinance calculator.
Switching 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. By doing so, you can 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.
Repaying 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, for instance, your payment will increase, but the total amount that you pay over the life of the loan will be substantially less.
Ready to see if refinancing works for you? Start by visiting our online mortgage center. You can apply online, get a personalized rate quote, connect with a mortgage advisor or simply use a variety of resources and tools to answer your mortgage questions.