As rates get higher, more and more people are considering the option to refinance their mortgage in hopes of finding better terms than the previous one. Despite the potential benefits that refinancing can have on a mortgage, many homeowners choose not to do so. If you’ve ever considered this an option but have apprehensions, check out these top reasons to refinance your home.
You may get a lower interest rate
This is, by far, the most popular reason why many homeowners refinance their mortgage. By getting a lower interest rate, homeowners can get the benefit of smaller payments, or if they prefer, a shorter payment term.
Aside from being able to easily deduct the smaller payments from your monthly budget, you can create a proper payment plan that can follow through with future costs as well. Moreover, a lower interest rate allows you to save more money (if you haven’t shortened the overall term), which is beneficial if you plan to stay in the home for a prolonged period of time.
A fixed rate is better than an adjustable one
Even though an adjustable rate mortgage seemed like a good idea, fluctuating rates and inflation are scary concepts which give many homeowners nightmares. That’s why experts always recommend that a predictable interest rate, even if it is a little higher, is better than an unpredictable one that gives minimal savings in the meantime. This is especially the case if you have other unpredictable expenses that you simply can’t account for.
You have a better credit score now
Not having an adequate credit score at the time of purchase may have led you to a mortgage with higher interest rates. In the case that you’re considering mortgage refinancing but the rates haven’t really improved, you can use your better credit score to get yourself a lower rate.
You can withdraw built-up equity on your home
If you have built up the real property value of your home, refinancing your home mortgage allows you to cash out and save money for bigger expenses like vacations, tuition fees or even a home renovation. This is considered to be a better option than using credit cards to pay for bigger expenses, because of how they have higher interest rates.
Allows you to change the terms and names in a mortgage
In certain circumstances like marriage, the death of a partner, or divorce, it’s likely that you’ll want to change the terms of the mortgage. Specifically, you need to change the names of the people on the mortgage and for this, a refinance is necessary.
Restructure your payment plan
Even in the case that you’re able to pay off a large portion of your mortgage, you would still have to make the same payment each month unless you’re completely paying it off. Refinancing your mortgage lets you pay off a lump sum so that you can leverage the benefit of being able to repay in smaller payments later on.
These are some of the best reasons why you should refinance your mortgage, especially if you’ve found your dream home that you intend to keep for a long time.
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