Reasons to Refinance Your Mortgage Today
There are several reasons why one may choose to refinance their mortgage. It is important to understand when it is the right time to refinance depending on your specific circumstances. Refinancing your mortgage involves paying off your existing mortgage (loan) by taking out a new one. Refinancing may be done to take advantage of the market or to lower monthly payments during financial hardships. Here are the most common reasons people choose to refinance:
1. To Lower Your Interest Rate
The most common reason why people choose to refinance their home is to achieve a lower interest rate, and in turn, lower monthly payments. If one can achieve an interest rate that is 2% lower than whatever they are currently paying, then experts agree that refinancing is in the home owner’s best interest. If the benefits are lower than 2% in savings, then it is usually not a smart long-term financial decision to refinance. In this situation, you would take out a new mortgage (with a lower interest rate) and use that to pay off your current mortgage. Your new, refinanced mortgage payments will be lower now that you have a lower interest rate. This is an excellent way to save money each month, especially when money is tight. Keep in mind, however, that there are costs associated with refinancing.
2. To Shorten the Term of Your Loan
Refinancing also tends to help homeowners lower their mortgage term. With a lower interest rate, many are able to keep payments the same, or just slightly higher, while cutting the loan repayment term in half. This is a great way to consolidate debt and hopefully lessen your debt burden in the future.
- To Switch from an ARM to Fixed Rate Mortgage (Or Vice-Versa)
Did you start out with an adjustable-rate mortgage (ARM) because of the attractive rate at signing? Unfortunately, that rate can increase much higher over time, depending on the market, and could end up costing you big time. Refinancing from an ARM to a fixed-rate mortgage may be ideal if you are looking to lock down a steady mortgage rate rather than one that fluctuates. The opposite can just as well be true. For example, you may have a higher fixed rate at a time when interest rates are falling, making it a good financial decision to take advantage with an ARM. Speaking with a mortgage professional will help you determine which is the right decision in the current market.
More Mortgage Refinancing Information from Guard Hill Financial
Keep in mind that refinancing is not always the best option for your financial situation. The best option is always speaking to a qualified mortgage professional. At GuardHill Financial, we offer our clients the most competitive interest rates in the tri-state area and beyond. We can consult with you to determine if refinancing is in your best interest based on the market and future predictions, while also taking your personal financial picture into consideration. For more information on refinancing your mortgage and to determine if now is the right time to refinance, contact GuardHill Financial today.