Home is the place where family gathers, holidays are celebrated, and memories are made. Because of that, it takes a lot of time, energy, and money to locate the home that’s right for you and your family. So, once you’ve found that special place and your monthly mortgage payments are buzzing along, what reasons could you possibly have to refinance?
There are several reasons to refinance, many of which involve cashing-in on lower interest rates. However, what do you do when interest rates are on the rise? Here are some of the reasons why someone may choose to head down the road to mortgage refinance whether interest rates are low, or on the rise.
Lower the Interest Rate
Some people refinance their home to lower the interest rate. There are many economic factors that determine long and short-term rates and keeping tabs on them can help you decide if refinancing is right for you.
Shorten the Term and Build Equity
For some, paying down debt as quickly as possible is the main priority. And for those who have a mortgage, refinancing their home is one way to get it paid off faster. Instead of paying the standard 30-year mortgage homeowners can switch to a 15-year mortgage, get the home paid off, and build equity at a faster rate.
Change Loan Type
When purchasing a home, you can get an adjustable rate or a fixed rate. However, if you change your mind down the line – whether it’s because interest rates have changed or for personal reasons – you can choose an alternative option that fits your needs.
Cash-Out on Equity
For those who have homes that have appraised at a much higher value than they paid originally, or simply have built significant equity in their homes, borrowing cash against this equity is an attractive option. The amount you can cash-out will vary depending on several factors. For example, if your home is now worth $50K more than it was when you first got your mortgage, and you want to borrow $25k against your increased equity, you can. However, that $25K will be added to your refinanced mortgage, and your monthly payments will be adjusted accordingly.
Sources:
https://www.investopedia.com/articles/pf/05/033005.asp
https://www.bankrate.com/finance/refinance/5-ways-reasons-to-refinance-mortgage-1.aspx
https://www.thetruthaboutmortgage.com/18-reasons-to-refinance-your-mortgage/
https://www.bankrate.com/finance/mortgages/removing-private-mortgage-insurance.aspx
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