4 Great Reasons To Refinance Your Mortgage

When considering whether or not to refinance your mortgage it can be tempting to just leave well enough alone. After all, you’re comfortably paying your current mortgage amount each month and the refinancing process will take time and paperwork. Before you make your decision, however, you should carefully consider these four benefits of refinancing:

Lower Your Monthly Payments

The main benefit of refinancing a mortgage for many homeowners is that it often leads to much lower monthly mortgage payments. The new loan will be based on the amount you owe now, rather than the amount that you originally took out, which should lower your payments as a result. Even if your current mortgage payments are quite reasonable, the extra money you save each month can go toward home improvements, building your savings, investing, paying off debt, or even going on a fun vacation.

Lower Your Interest Rate

If interest rates are lower now than they were when you took out your home loan, that is a great reason to refinance. Once your new, lower rate kicks in your monthly payments will not only be lower, but your loan may be able to be paid off faster too.

Bear in mind though that if you’re planning to sell your home relatively soon, the savings from a lower interest rate might not be very much compared to the closing costs involved in refinancing. Sometimes banks offer specials to existing customers allowing them to refinance with low (or even no) closing costs, making the interest rate savings even more beneficial.

Use Some of the Equity

Once you refinance your home, you may find that you are eligible to take out some of the equity you have built up. This money can be used to make repairs or renovations around the house (leading to increased home value), or even totally unrelated things like paying off high-interest debt or paying off a car loan.

Change the Terms

Many homeowners use a refinance as an opportunity to restructure their loan to more favorable terms. For example, if you currently have an adjustable rate mortgage you may want to change it to a fixed rate mortgage. This way you can lock in a low-interest rate and not worry about your mortgage increasing significantly in coming years.

If you’re considering this course of action, it’s best to sit down with a broker who handles refinanced mortgages and go over your options.  They will also be able to explain how these benefits will apply to your unique mortgage situation.

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