Should you refinance your mortgage? It’s a question millions of Americans are asking as interest rates continue to hover at historic lows. While interest rates have never been lower, that doesn’t necessarily mean that everyone with a mortgage needs to refinance. However, for the majority of homeowners, now is the best time to take advantage of current interest rates and secure a lower monthly payment. This article outlines the top five reasons to refinance a mortgage and hopefully provides some useful information for homeowners.
- Get a lower monthly payment.
By refinancing your mortgage when interest rates are lower, you can trade a higher interest rate for a lower rate, which will lower your monthly payment. For the millions of Americans who are struggling to keep up with their monthly payments, locking in a lower monthly payment can be very helpful for a household’s overall financial health.
- You can shorten the term of your mortgage when refinancing.
For example, let’s say you originally had a 30-year mortgage and have now been paying it for seven years. With a mortgage refinance, you can switch to a shorter-term loan, either 10, 15, or 20 years. This can save you thousands of dollars in interest.
- You can apply for cash financing that will put more money in your pocket by using the equity you built in your home and putting money in your pocket.
You can refinance your mortgage for an amount greater than your current principal balance and take the additional funds in cash. This gives you the money you need to expand your home, pay off high-interest bills, or build an education fund for your children.
- You can get rid of private mortgage insurance if you have more than 20% equity in your loan.
Most of the time, private mortgage insurance is required for consumers who cannot put at least 20% down when they buy a home. However, when you refinance, you may very well have established more than 20% equity and can get rid of this extra expense.
- You have an adjustable-rate mortgage and want to switch to a fixed-rate mortgage.
If you have a variable rate mortgage (ARM), your mortgage payments will fluctuate each month and will never be the same. If you don’t like the uncertainty that comes with variable-rate mortgages, you can refinance to a fixed-rate mortgage and lock in a fixed payment for the life of your mortgage.
There has never been a better time to refinance your mortgage. Interest rates have never been lower, but they won’t stay that way forever, so now is the time to act. Refinance lenders will analyze your mortgage and inform you of the benefits and costs of refinancing. I strongly advise you to get several quotes from different to refinance lenders to get the best deal. The most popular way to get multiple quotes is to visit a multiple lender website that is affiliated with the top lenders. Most of these sites are free to the consumer and will provide you with up to four different quotes by filling out one online application.