Falling interest rates are great. Why not refinance your mortgage when they are down? There are plenty of other reasons it might make sense for you to refi. Maybe you want a lower monthly payment. Or use your home's equity to help with other financial needs.
Refinancing your mortgage can be a smart financial move that results in a variety of benefits for you. Let’s explore seven reasons you should consider refinancing your mortgage sooner rather than later.
1. Take Advantage of Better Interest Rates
If interest rates have dropped since you took out your original mortgage, refinancing can help you secure a lower rate. This can result in significant savings over the life of your loan. Even a small decrease in interest rates can lead to substantial long-term savings on interest payments.
2. Lower Your Monthly Payments
Refinancing can help lower your monthly mortgage payments, freeing up money for other expenses or savings goals. By extending the term of your loan or securing a lower interest rate, you can reduce your monthly payments. This in effect will make your mortgage more affordable in the long run.
3. Shorten Your Loan Term
By refinancing to a shorter mortgage term, such as switching from a 30-year mortgage to a 15-year mortgage, you can pay off your mortgage faster. You also can save on interest payments over time. While your monthly payments may be higher with a shorter term, the long-term savings on interest can be substantial.
4. Access Your Home’s Equity
Refinancing can enable you to access the equity you have built up in your home. For example, through a cash-out refinance, you can borrow against the equity in your home. You can then use the funds for other purposes, including home renovations, debt consolidation, or investing in another property. This can be a cost-effective way to leverage your home equity for financial gain.
5. Change Your Loan Type
Refinancing gives you the opportunity to change the type of loan you have. Let's say you currently have an adjustable-rate mortgage (ARM) and want more stability in your monthly payments. You can refinance into a fixed-rate mortgage. If you have a fixed-rate mortgage and believe interest rates will decrease in the future, you may opt for an ARM to take advantage of lower rates.
6. Eliminate Mortgage-Related Insurance
If you purchased your home with a down payment of less than 20%, you are likely paying for private mortgage insurance (PMI) or mortgage insurance premiums (MIP). One way to remove these costs is to refinance once you have built up enough equity in your home. By choosing to refinance when you reach a 20% equity threshold, you can eliminate the need for mortgage insurance, which decreases your monthly mortgage payment.
7. Pay Off Other Debt
If you have high-interest debt from things such as credit card debt or personal loans, refinancing can be a strategic way to consolidate debt and secure a lower interest rate. By rolling your high-interest debt into your mortgage through a cash-out refinance, you can benefit from a single, lower monthly payment and potentially save money on interest charges.
The Bottom Line
Whether you want to save money long- term, free up cash flow, or pay off other debt, there are many benefits to refinancing your mortgage. Once you’ve identified your goals, you should meet with a mortgage lender to discuss your options and determine if refinancing your mortgage is the right decision for you.
Ready to Refi? Our Home Loan Experts Can Help.
Take advantage of some of the benefits offered by refinancing your mortgage. Our team of home loan experts can walk you through all your options. No matter your goal – whether it’s to lower your interest rate, lock in a new rate, or shorten your loan term – we’re here to help. For more information or to apply, visit https://www.twinstarcu.com/loans/mortgage-refinance or call 800.258.3115.