There are myriad reasons why different people refinance their homes. Refinancing your home for the right reasons has the potential of guaranteeing you significant savings. In fact, any time you refinance, you are most likely going to pay considerably less interest, reduce your monthly payment or better still convert from say a 30-year loan to a 15-year loan and build your equity faster. Sounds like some pretty good incentives to refinance, right? Refinancing however, comes with a price and you should take this into account any time you want to refinance. By the same token, the benefits of refinancing cannot be denied. The following are the main reasons you should consider refinancing your home:
A guarantee for lower rates
This is perhaps the best reason you may want to refinance your home. Picture this: lower interests translate to savings – indeed, a good measure of savings in some cases. Refinancing a home with a relatively cheaper mortgage can significantly reduce your month-to-month payment as well as the interest you pay. I imagine you wish to have your home for many years, right? If your answer is yes, then consider a 15- to 30-year fixed home loan; otherwise you will sooner than later realize that ARMs and hybrid ARM carry the lowest rates. If you are looking to see what your refinance rate might be, check out this refinancing calculator from Credit Sesame.
Getting Adjustable Rate Mortgage or ARM
Some people detest surprises and unpredictability. If you are one of these people, you perhaps don’t fancy adjustable mortgage rates that change from time to time, depending on a rate that is pegged to a particular index. This means that your mortgage rate could fluctuate throughout the life of the loan. I also would imagine that you are not the happiest camper if your rates skyrocket. If that is the case, then a fixed mortgage rate suits you the best.
Desire to consolidate multiple loan payments
Refinancing may be a smart idea in the event you want to consolidate your loans out for your home. Besides the convenience of settling just a single bill, consolidating your loans has the potential of earning you a lower interest rate. Having said that though, it is worthwhile noting that consolidating your loans does not necessarily result in a lower interest rate. For this reason, it is advisable that you contact your lender and cautiously ascertain if there is a potential for savings. In case you don’t find benefits from combining your loans, it is not big deal to draw two checks in lieu of one. All you need is to make sure that you confirm if there are benefits prior to deciding to refinance and consolidate your loans.
Faster Payment of the Mortgage
Securing a 15-year mortgage loan can guarantee you a number of advantages. Granted, mortgage rates on a 15-year loan are, in most cases, half a percent lower in juxtaposition to those on 30-year fixed rate loan. The upshot of this is that your home equity rises and your interest expense declines. This trade-off ensures that your payment is higher and it behooves you to make sure that you can afford it prior to committing to this loan.
Trading Home Equity for Cash
Let’s contemplate a number of scenarios. Suppose you want to renovate your home, consolidate debt, pay tuition fees for your kids or any other reason for that matter. In such events, cash-out refinances suits you the best. You can use a home equity loan if you don’t want to part with the mortgage you have. Refinancing can enable you improve the terms and conditions of your mortgage and it is a simple thing to do. In the event you want to enjoy lower rates, want to swap your fixed-rate mortgage for an adjustable loan or maybe you want to cash out your home equity; you can follow the steps listed below to sail through the refinancing process:
- Decide if you really want to refinance
- Look for a lender
- Choose a refinance program
- Do the application for your refinance
- Look into your refinance rate
If you are looking for multiple quotes on how much you can save with refinancing, Credit Sesame can help you out.