In today’s bustling housing market, it might seem like the name of the game is buying and selling. On the contrary, mortgage rates are still at historic lows - which means it’s the perfect time to take advantage of these rates especially if you haven’t assessed your mortgage in a few years. Refinancing has a few advantages that might surprise you.
Secure a Lower Interest Rate
The most obvious benefit of refinancing is that in most cases, you’ll be able to secure a lower interest rate on your loan. If it’s been several years since you closed your loan, you’re probably paying a higher rate than loans closed today. Even a difference of 0.5% can make a difference of thousands of dollars on your loan, so it’s a great time to take advantage.
Switch from an Adjustable Rate to a Fixed Rate
When you bought your home, you might have been in a very different financial situation than you are now. Adjustable rate mortgages have some wonderful benefits, but the predictability of a fixed rate mortgage is almost unmatched. With a fixed rate mortgage, you’ll pay the same amount every month for the life of your loan. This predictability will help you to better budget, and you’ll be able to more easily calculate your payoff amount.
Shorten Your Loan Term
If you’ve been paying on your mortgage for a few years, but you’re planning on staying in your home for a long time, it might be a good idea to look into refinancing. Shortening your loan term will help you build equity much faster than your original loan term, which means you'll be able to free up funds for other expenses much sooner. With a shorter term loan, you'll be able to pay off your loan sooner and reallocate funds to retirement, travel, or even turn your home into an investment property with less overhead.
Cash In on Acquired Equity
In many cases, you can use refinancing as an opportunity to pull out existing equity you have in your home. When you refinance, you can take out the difference of your loan verses what your home is appraised for and put that money towards other expenses. If you’ve updated your home since you bought it, this is a great time to assess its current value and take advantage of the increase in value. When you pull out that equity, you can use it to make large purchases, or you can invest it back in your home to make improvements that will grow the value even more - a decision that will pay off if you ever decide to sell your home or refinance again.
Consolidate Debt
Refinancing will often result in a lower monthly payment, which will free up cash to pay off other existing debts. In addition, if you pulled out any acquired equity, you can use that to pay off other balances you might have. Refinancing is a great opportunity to reassess your finances and make some meaningful changes towards overall financial health.
Remove Private Mortgage Insurance
Many loan programs require private mortgage insurance until you build a specific amount of equity in your home. If you’ve built up some equity over the life of your loan, refinancing will help you figure out if you still need mortgage insurance. You might even be able to refinance to a program that doesn’t require monthly insurance.
Overall, refinancing can help you give a face-lift to your overall financial landscape. Through refinancing, you can free up cash, switch to a better program, and even shorten the term of your loan. Reach out to an experienced Flat Branch Home Loans lender to assess your mortgage and find the best refinance option for you.
