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There are many benefits to refinancing your home. How do you get the most value out of refinancing, and is it even the right decision for you? PrimeLending can help you make the best decisions for your needs.
Is this a good time to refinance?
If one or more of the following scenarios applies to you, it may be a good time to look into refinancing:
- Your home has greatly appreciated in value. Occasionally, certain regions of the country experience a significant rise in home prices. Refinancing allows you take advantage of your home’s increased equity.
- Mortgage interest rates are falling. If market rates drop ½% to ⅝% below your current interest rate, it could be a good scenario for you to refinance your home. In a market where interest rates are falling, there are two potential benefits that could help lower your overall loan amount.
- The first option would allow you to shorten the terms of your repayment while still making the same or comparable payment amounts.
- The other option allows you to lower your monthly payments while keeping the same or comparable repayment term. Either way, you find yourself with a way to save money on your mortgage investment.
- You have an adjustable-rate mortgage (ARM). If you have a mortgage with a variable interest rate, there is a good chance your rate will adjust based on LIBOR (London Interbank Offered Rate). LIBOR will be phased out by 2021, and an alternative published index will be selected which may behave differently than the LIBOR has historically behaved. With these changes, now may be a good time to consider refinancing to lock in a loan program you can count on.
- You are early in your mortgage term. Refinancing at this point, when payments are mostly being directed towards interest, tends to benefit you more later in the life of the mortgage when payments are going more toward the principal than the interest.
We recommend not jumping into refinancing as soon as one of these factors, like falling interest rates, does come in to play. To make the best decision for you and your financial situation, you’ll want to consider all the contributing factors, such as how long you plan to stay in the home and how going through the process would help you achieve your long-term financial goals. If you are considering refinancing, PrimeLending will be happy to offer timely, expert advice.
What are the benefits of refinancing?
It's important to remember that refinancing starts homeowners off with a new mortgage entirely; it takes them back to the beginning of the payment process. But, the benefits of starting over with a new mortgage may be entirely worth it. Homeowners are able to:
- Change their loan from a balloon or an adjustable-rate mortgage to a fixed-rate mortgage and thereby lower the risk of a changing interest rate.
- Decrease their monthly mortgage payments by lengthening the repayment term or changing to a lower interest rate.
- Benefit from the lower mortgage interest rates, allowing homeowners to decrease the interest costs over the life of the loan.
- Shorten the term of the loan and pay off the loan quicker.
- All of this frees funds to help consolidate other debts and put toward other expenses such as a college fund, retirement, home improvements or any other major expenses.