What are some of the reasons that people choose to refinance their mortgage?
Refinancing can save a homeowner a lot of cash, and years of having to pay off mortgage debt. Homeowners should know, though, that it takes lots of work to do it. You can’t simply walk in and tell the bank you want to refinance, and that be that. Here are some reasons that you might want to consider refinancing your mortgage (if you can).
Refinancing your mortgage is going to shorten your loan term. For example, i you’ve got a thirty year mortgage, now is a great time to consider refinancing it. When interest rate are low, you’ll see that a fifteen year mortgage actually isn’t all that more costly than the thirty year mortgage you’ve got right now.
What you should do is begin by calculating your mortgage so that you can get an idea of what the new payment would be. If the new payment looks good, and you think you can handle the payment financially with no problems, then you should talk to your lender. to get an idea of what your new payment might be. If your new estimated payment is feasible, consider contacting a mortgage professional.
Another great reason to refinance is to lower the interest rate on your mortgage. When interest rates are low, it is wise to take advantage of it, as it doesn’t happen all that often. If your current mortgage has a very high interest rate, refinancing is probably a good route to take. You can actually save thousands and thousands of dollars by taking the few simple steps it takes to get your mortgage refinanced.
Refinancing will get you a lower interest rate as well. If your loan currently comes with hefty interest payments, you’ll want to take advantage if the interest rates have lowered. You can save thousands upon thousands of dollars
Consider refinancing as well, if you want to lower your monthly mortgage payment. Again, you’ll save thousands just by not paying the high interest rate, alone. If you lower your mortgage payment, you’ll have more money each month left over to either spend, save, or invest. Lowering your payment obviously is going to increase the length of your loan; it will all depend upon your lifestyle. Everyone’s situation is different.
Yet another reason for refinancing is to switch from an ARM (adjustable rate mortgage) to a fixed rate mortgage. If you currently have an ARM, you may want to get a fixed rate. The reason is that a fixed rate locks you in for a specific amount regarding interest; this means, no matter if it moves up (and down), you’ll pay the same. It’s also easier to budget this way, since you know what the payment will be each month.
Lastly, you can refinance in order to get equity on your home. It is always tempting to “cash out” your home equity by refinancing. In some ways, it can be a smart move. For example, if you’re looking to start a business, or invest in properties. It depends on each individual and their goals. Remember, that while you’re deciding if you should refinance, note that you might not qualify anyway. You have to meet the following requirements in order to qualify for a refinance on your mortgage:
- The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP before 2009.
- The current loan-to-value (LTV) ratio must be greater than eighty percent.
- The borrower must be current on the mortgage at the time of the refinance, with a good payment history within the past year.
There are many things to consider before refinancing your mortgage. Most importantly, you should weigh the pros and cons of your particular situation and decide, based on what your life looks like right now, and what would benefit you. For more information, read this article on When to Finance Your Mortgage.