There are numerous reasons why people decide to refinance their mortgages with the most common reason for refinancing a mortgage is to save money. A refinance could save you thousands of dollars in interest, or save money on your outgoing monthly expenditures if you use the refinance to consolidate other debts. Here’s a look at some of the various advantages a mortgage refinance provides:
1. Consolidating and saving on other interest costs. A really beneficial use of a mortgage refinance is to help reduce the amount of money you pay out each month on various accounts. If you can reduce the overall interest rate in the process, that’s an even greater benefit that you’ll feel over the long-term! If you have numerous credit cards with balances, the interest rates are eating away at your money, especially if they have high interest rates. Streamline your debt by paying off credit cards, auto loans and personal loans with your refinance and improve your monthly cash flow.
2. Lower the interest rate on your existing mortgage. If the market has improved since you obtained your mortgage and you could save two percentage points or more on your mortgage, it’s probably a good time to consider refinancing your mortgage to take advantage of the lower interest rates. If you have good credit, you may even be able to avoid paying the closing costs, which make the refinance even more desirable. A mortgage with a lower interest rate will result in lower monthly payments, which is a major selling point to individuals who are struggling to keep up with their payments.
3. Converting Adjustable-Rate-Mortgages into Fixed-Rate mortgages. Often times, people get an adjustable rate mortgage because they’re extremely attractive when they first get it- with low interest and payments. As the interest rates rise, though, the outcome is a mortgage payment most people can’t afford. Refinancing an adjustable rate mortgage into a sensible fixed-rate mortgage is often a necessity for out of control adjustable rate mortgages.
4. Changing life situations may create a beneficial opportunity to restructure the length of your mortgage term. When you close on your house, your life is in a certain “phase”, and your financial situation as well as many other aspects having to do with your life may change as time goes on. If you’ve advanced in your career and you have a better cash flow than you had originally, you might choose to decrease the length of your mortgage term to fifteen years in order to save on the total interest you’re paying. Alternatively, if you’re thinking about selling the house, or your financial situation has taken a turn for the worse, you could choose a longer loan term to reduce what you pay on a monthly basis and free up some of your money each month.
5. Get your finances back in order. There are times that your financial situation may go downhill quickly and without warning. For whatever reason, you may find it difficult to keep up with your payments on your mortgage or other obligations. If you fall behind and begin missing payments, you’re going to find it even more difficult to get caught up. There is a possibility that you may be able to use a mortgage refinance to get yourself back on track. If you were to consolidate most of your other creditors into your mortgage payment, lower your interest and/or extend your loan term- you could create a more affordable monthly payment that allows you to get back on track financially.
There are many opportunities for benefiting from refinancing your mortgage. Consider your own financial situation and where you are in your life currently, and determine if a mortgage refinance would benefit you and put more money into your pocket.