Benefits of Mortgage Refinance

Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many common reasons why homeowners refinance: The opportunity to obtain a lower interest rate to decrease monthly payment, shorten the term of their mortgage, the desire to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa, the opportunity to tap a home's equity in order to finance a large purchase, or the desire to consolidate debt. If any of these sound good to you, keep reading. How does this process occur? Basically, refinancing is done when you seek to obtain a different or even better interest term and rate. Before you refinance take a careful look at your financial situation, and ask yourself: How long do I plan to continue living in the house? And how much money will I save by refinancing? If reducing your monthly payment is your goal, and interest rates are low, refinancing is the way to go. Reducing your interest rate not only helps you save money, but it increases the rate at which you build equity in your home, and it can decrease the size of your monthly payment. When interest rates fall, homeowners often have the opportunity to refinance an existing loan for another loan that, without much change in the monthly payment, has a shorter term. You can go from a 30 year fixed to a 15 year fixed with a slight change in monthly payment if you are wanting to decrease the time it takes to pay off your loan. If you have an adjustable rate mortgage, you may want to consider going to a fixed in order to secure a lower interest rate as well as eliminating the concern over future interest rate hikes. Conversely, converting from a fixed-rate loan to an ARM can also be a sound financial strategy, particularly in a falling interest rate environment. If rates continue to fall, the periodic rate adjustments on an ARM result in decreasing rates and smaller monthly mortgage payments, eliminating the need to refinance every time rates drop. Converting to an ARM may be a good idea especially for homeowners who don't plan to stay in their home for more than a few years. If interest rates are falling, these homeowners can reduce their loan's interest rate and monthly payment, but they won't have to worry about interest rates rising in the future. To see what your monthly payment would be with a lower interest rate click here. Another option homeowners often access is the equity in their homes to cover big expenses, such as the costs of home remodeling or a child's college education. Many homeowners also refinance in order to consolidate their debt. Whatever your financial need, refinancing is indeed an option to help you achieve your financial goals for the future. First consider what goal you are wanting to achieve by refinancing, then find the right lender to assist you with the process. Now is the time, when rates are low to consider saving yourself hundreds or thousands of dollars per year.