Refinance

Lower Your Monthly Paymentrefinance-home-1000

If refinance would shave a half percent off your interest rate, you could significantly lower your payments, freeing up cash every month, as well as save a hefty sum over the life of your loan. And with current rates at historical lows, now’s the time to look into refinancing.
You can take care of the refinancing costs when you roll them into your new mortgage loan, and keep the cash in your pocket. Most experts say refinancing makes sense if you can recoup the costs of refinancing within two to three years.

Pay Off Your Loan Faster

Why not consider a mortgage term reduction with a rate reduction to make the most of your refinance? Refinancing to a shorter term loan (such as converting from a 30-year fixed to a 15-year fixed) could potentially reduce the interest expenses you’ll pay over the life of the loan and allow you to pay off your home faster.

If you’re a homeowner with an adjustable-rate mortgage (ARM), you could lock into a fixed rate to stabilize your monthly payments. Some people may even decide to refinance out of their existing ARM and into a new ARM loan as a temporary solution for avoiding bigger payments.

Cash Out from Equity

A “cash-out refinance” means you can take cash from some of the equity in your home when you refinance. This is a great way to borrow money, because the interest rate on mortgage loans are usually much lower than any other line of credit.
There are also tax benefits because mortgage interest is tax-deductible; this is one of the reasons why so many borrowers refinance their homes to pay off all their credit card debt (which is not tax deductible).

The most common reasons to cash out is to pay off debts, which can increase your cash flow because you’re lowering the monthly payments by extending the payments over a longer term.

You can take cash out on a refinance to:

  • Pay off other high-cost loans (the interest on which may not be tax deductible)
  • Pay for the cost of education
  • Make home improvements
  • Make investments
  • Finance retirement

Change to a Fixed-Rate Loan

Moving to an adjustable-rate mortgage to a fixed-rate mortgage will not only give you peace of mind, it may even save you money in the long run. Though no one can accurately predict if rates are going to go down later (though many have tried), today’s low rates make it attractive for those with adjustable-rate mortgages to refinance to fixed-rate mortgages.
Here are the main reasons why you may like to move from an adjustable rate to a fixed rate:

  • You’ll know exactly how much your monthly payment will be for the life of your loan, regardless of what happens in the market
  • Guard against possible rate hikes; after the initial low-rate period of an ARM ends, you’re susceptible to a fluctuating market and could have to pay higher monthly payments
  • If the property values in your area are dropping, you may want to refinance to a fixed-rate mortgage now to protect your investment