While there are many potential benefits of refinancing, it’s not always a good idea to refinance your mortgage. If you’re considering a refinance, here are a few things to consider:
Are mortgage interest rates increasing?
If you currently have an adjustable-rate mortgage (ARM) and you anticipate interest rates are increasing, you’ll want to try and switch to a fixed rate mortgage. When you have a fixed rate mortgage, your interest rate will stay the same throughout the course of the loan (unless you refinance it again later). If you already have a fixed-rate mortgage and interest rates are increasing, you probably will not want to refinance. Sometimes people refinance despite getting a higher interest rate if they need to take equity out of their home or change the term of the loan – maybe from 30 years to 15 years, so they can pay it off faster.
Are you having trouble making your payments each month?
If you’re struggling to make ends meet, it may be a good idea to refinance your mortgage if you can lower the interest rate or change the monthly payment amount to a lower amount. This can be done by refinancing the remaining balance on your mortgage loan to a new 30-year loan. The lower balance combined with a longer repayment term will reduce your monthly payments. If you qualify for a lower interest rate, you can decrease your monthly payment even more.
Do you need to consolidate other debts?
If you find your credit cards or loan payments have gotten out of control, you may decide to take some of the equity out of your home to pay off those debts. Once you have used the home’s equity to pay off debts, you’ll just have the one payment for your home each month to worry about. You’ll save money on interest payments most likely, and it makes it easier to keep track of payments.
Your credit has improved
Your credit score is a significant factor in determining your mortgage rate. Generally speaking, the higher your credit score is, the lower the interest rate you’ll receive. The good news is that being approved for a mortgage can improve your credit score over time, as long as you make regular payments.
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Want to reduce your home payment, remodel your kitchen, or other big expense? Or maybe you just want to consolidate your debts and get a better rate. Whatever your goal is, we’ll make it our goal, too.
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