There are compelling advantages to refinancing your mortgage. You can lower your interest rate, switch to a fixed rate, or make multiple other changes to your mortgage. Before you refinance house payments, however, you should check out these facts.
Lowered Interest Rates Save You a Lot of Money
Many homeowners refinance house payments to lower their interest rates. Even a small adjustment to your rate can lower your monthly payments substantially, and lower interest rates help you save a lot of money through the lifetime of the loan. Your loan officer can help you determine exactly how much you are likely to save.
Switching to a Fixed Interest Rate Removes Surprises
If you have an adjustable rate mortgage, your interest rate changes on a regular basis. Some adjustable rate mortgages change the rate annually, while others change every five years or on another schedule. As explained above, interest rates have a huge impact on monthly payments.
As a result, if your rate adjusts, your monthly payments can increase substantially. Dealing with those unexpected changes can be hard on your budget, and a sudden swing upward can make it impossible to stay on top of your payments. When you refinance house payments from an adjustable-rate to a fixed-rate mortgage, you eliminate these surprises.
Shortening the Term Helps You Pay Off Your Mortgage Faster
You can also opt to shorten the term when you refinance house mortgage. The term is the length of time you have to pay off the home. Traditional mortgages have a 30-year term, but if you want to ensure that you pay off the mortgage faster, you may want to switch to a 15 or 20-year term. In addition to helping you pay off your home sooner, a shorter term also helps you to save money on interest in the long term.
You Can Cash Out Your Equity With Some Refinance Loans
With some plans, you can refinance house and cash out the equity. Equity is the value of your home over and above how much you owe on your mortgage. For example, if you owe $100,000 on your mortgage, but your home is worth $250,000, you have $150,000 in equity.
With a cash-out refinance, you get a loan for close to the whole value of the home. Then, you get to keep the difference in cash. This can be useful for homeowners who want to refurbish their homes, pay for their kids to go to college, or deal with other large expenses.
You Have to Apply to Refinance House Payments
As a general rule of thumb, if you want to refinance house payments, you have to apply for a refinance loan. Most loans require you to be current on your existing mortgage payments, but there are exceptions. Similarly, most refinance programs have credit limitations—your credit score has to be above a certain level to qualify. You may have to met additional criteria depending on the type of loan.
To learn more about refinancing house payments, contact BrightPath today. We can help you learn about a huge range of different refinance opportunities. To get started, give us a call or apply online today.