Refinancing your mortgage loan can be a smart move as it is essentially a new loan that replaces your existing loan. This can lower your interest rate, allow you to access the equity in your home, save you thousands of dollars in your mortgage loan, and take years off the length of time it can take to repay your loan.
Should I refinance?
When you’re deciding whether or not you should refinance, consider your financial goals. Do you want to lower your monthly payment or receive a lower interest rate? Are you trying to do a cash-out refinance or looking to shorten your term? Our refinance calculator can help you determine whether now is the time to refinance and if this can help you meet your financial goals.
When deciding whether or not to refinance, figure out how long you plan to live in your house. Refinancing can be a smart move, but if you think you could move in the future, it may not be wise to pay massive closing costs just to get a lower rate.
Can refinancing lower my monthly mortgage rate?
Refinancing can help lower your monthly mortgage rate by locking in a lower interest rate. The higher your interest rate, the more you pay for your mortgage. As long as you don’t shorten the length of your mortgage term, you can get a lower rate through refinancing. If you refinance to a loan with a longer-term, you’re stretching out the amount you owe over a longer period of time where you may pay more interest, but your monthly payment will go down. It’s a refinancing option to consider when looking at your current finances.
Another option to consider is stopping your private mortgage insurance payments. These payments come when you put less than 20% down on your home loan. If you refinance, and you have enough equity, you can eliminate this extra monthly payment.
Are there advantages in refinancing to a shorter loan term?
Refinancing to a shorter loan term won’t lower your monthly mortgage rate, but there are advantages to consider if you can afford a higher monthly cost. First, you can own your home much sooner than you would on your current longer term. When considering your financial situation, this could benefit you in the future. You can also save on interest. Loans with shorter repayment periods usually have much lower interest rates.
How can I refinance to take cash out of my home?
To be able to refinance to take cash out of your home, you need to have enough equity. Taking cash out of your home means you refinance your home with a larger loan amount than what you had before. This new loan will pay off the existing loan and you get to cash in on the difference. This cash is tax-free so you can spend it however you see fit. Many homeowners refinance to take cash out so they can fund expensive home improvements or pay off high debt.