Should You Refinance Your Home?Share
The average length of mortgages in the United States is 30 years. Sometimes the terms that appealed to a homeowner when they initially got the loan don't seem so appealing at a different stage in their life. Homeowners may want to look into refinancing. When homeowners refinance, they apply for a new loan with better terms. The process costs money, but it can lead to serious savings. Read more to determine if you should refinance your home.
When Should a Homeowner Refinance?
Lower Interest Rate
Lenders determine your mortgage's interest rate based on your credit score, down payment, loan amount, and the type of loan. Interest rates also change based on the economy. Over time, your financial situation may qualify for a significantly better interest rate at the right time. Take advantage of the opportunity in this interest. A lower interest rate will result in a lower total amount.
Shorten the Length of the Mortgage
In some situations, a lower interest rate can allow a homeowner to shorten the length of the loan. This option is ideal for lenders who are eager to pay off their house and put the mortgage into savings. Homeowners should work with a mortgage broker to determine a new schedule that makes financial sense for the homeowner while offering the most savings.
Switch From ARM to FRM
Adjusted rate mortgages (ARM) can change with little notice. These rates usually start low and then increase and decrease volatilely. When mortgage rates are low, this can be a good option, especially if the lender is almost up with the loan. Flat-rate mortgages (FRM) stay consistent but usually start higher than ARMs. FRMs make the most sense when a homeowner just started the mortgage.
Receive Emergency Funds
Sometimes people take out a mortgage on their house to receive emergency funds after an unexpected expense. When you refinance, you get access to some of the capital you've already put into your home. Refinancing your home to access funds can put homeowners into a worse situation if they don't consider all factors at the beginning.
How to Refinance Your Home Mortgage
To refinance your home, get your finances together. Organize all monthly bills, incomes, and assets to present them to the lender. Apply for a new mortgage with a reputable financial institution. They will return with an offer. You can decide whether to move forward or not. Do not move forward unless the savings will outweigh the initial cost of the refinance.
Contact a local refinancing service to learn more.