Is mortgage refinancing right for you?
1. Lower your monthly payment
One of the best reasons why you should refinance your mortgage is to lower your monthly payment through lower interest rates. However, you should make sure that current mortgage rates are lower than the one in your current mortgage. Don’t underestimate decimal points when it comes to these rates for it could save you thousands in your payments.
2. Shorten your loan term
There’s not a better relief than paying off your mortgage earlier than you originally planned. Whether it’s a mortgage, car loan, credit cards or any other financial obligations; paying it off early, even for a single month, is a huge weight off your shoulders already.
Refinancing your mortgage for a shorter term gives you an opportunity to finish off paying for your home loan sooner. Just make sure you’re ready to take on higher payments, but in the long haul, the financial freedom this’ll give you is worth it.
3. Enjoy predictability and stability in your finances
If your current loan is an adjustable rate mortgage (ARM), you can refinance to a fixed-rate loan. This means you’ll be able to lock in a rate that’ll protect you from the rising rates in the future. This’ll bring stability in your finances since the rates are already fixed, making your monthly payments predictable. You’ll have a good sense of control over your finances, and you’ll be able to budget better.
4. Build your equity faster
This may sound far off at first, but switching to a shorter term, which will lead you to higher payments, can be a great deal for homeowners. Shortening your mortgage term from a 30-year to a 15-year mortgage, for instance, will help you build you equity faster. This move will also save you more money for lower interest rates.
When you build your home equity, you’re increasing the value of your home and decreasing the amount you owe.
5. Get cash to pay for your needs
Mortgage refinancing is a good opportunity to access your equity, especially for times you most need it. A cash-out refinance is a good alternative to home equity loan that lets you cash out a lump sum from your home equity. This works by refinancing for a mortgage that’s more than you owe and taking the difference as cash.
Many homeowners tap into this and maximize this for their home renovations and improvements, investments on a property, or child’s education.
6. Improve your credit score
Besides paying your mortgage on time every month, using your extra cash from the cash-out finance can also improve your credit score. You can maximize your cash-out finance to pay off credit cards and other debts faster, boosting your credit score. You can also simply put the extra cash to high-yield investments and savings accounts.
7. Consolidate your debt
You can use mortgage refinancing to consolidate debt. For instance, if you have other high-interest debts, credit cards, or student loans, you can consider refinancing your mortgage.
Debt consolidation means you’re combining all your debts into one loan, with a single interest rate for all of these in one regular monthly payment. This’ll ease your burden of managing multiple debts and will bring huge improvements on your cash flow.