If the seesawing of home mortgage interest rates has you debating whether you should refinance, it is time to take action. It’s still a good time to refinance, because today’s rates are still attractive and low enough to build equity in your home at a healthy rate.
There are many instances in which refinancing might make sense for you, including the following:
- Lowering your interest rate: If you secured a loan when rates were higher, refinancing could result in lower monthly payments and less interest paid over the life of the loan. If you’re looking to put additional money into savings or you need a source of funding for home improvements, this could be a viable option.
- Getting a different type of loan: Many people who start out with an adjustable-rate loan like to switch to a fixed-rate loan. Adjustable-rate loans have monthly payments that vary. With a fixed-rate loan, there are no surprises and you know you can count on the same payment every month. It offers stability and security.
- Avoiding foreclosure: If you keep up on your payments but don’t have any equity in your home, you might be able to refinance with the Home Affordable Refinance Program with the goal of lower monthly payments. Refinancing can help keep you in your home and get you on more financially stable ground.
- Building equity: If you refinance, you’ll ultimately land a lower interest rate. That means less of your payment will be going toward interest and more will be going to the principal. The more principal you pay, the more equity you’ll acquire in the house. If you can afford to, you could even go for a shorter-term loan; perhaps refinance a 30-year loan into a 15-year loan. Chances are, your monthly payments will be higher, but you’ll pay off the loan quicker and your equity will build at a quicker rate.
- Using equity: If you want to pay off mounting credit cards, you need money to send your child to college or you want to turn the dream of a kitchen remodel into a reality, you can use the money from the equity in your house for whatever you’d like.
If you want more information about refinancing now while home mortgage interest rates are favorable, you should talk to your lender. They’ll take a look at your situation and advise you of the best course of action for your refinance.
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