When is the Right Time to Refinance Your Mortgage?
Considering refinancing but don’t know if the time is right? Refinancing allows you to pay off an existing loan in exchange for a new one. There are always unique pros and cons to refinancing, so regardless of your reasoning and financial situation you should read our blog below as the Home Loan Experts at Assurance Financial walk you through a few reasons why you should consider it and advice on when the time can be right for you.
Lowering Your Interest Rate
The number one reason most people refinance their mortgage is to secure a lower interest rate. It’s typically not worth the money to refinance unless you can reduce your interest rate by at least 2%. Overall, lowering your interest rate saves you money and increases the rate you build equity. An additional perk is that you’ll see a decrease in your monthly payments.
Switching Between Adjustable-Rate and Fixed Rate Mortgage
It’s common for an adjustable-rate mortgage to start out offering a lower rate than a fixed mortgage, but over time adjustments can lead to substantial rate increases. Sometimes these new rates are higher than those available through a fixed mortgage. For some homeowners, converting to a fixed rate mortgage can result in a significantly lower interest rate and eases concerns about future increases. On the other hand, transitioning from a fixed rate loan to an adjustable rate mortgage can also be a wise financial decision, depending on the interest rate environment. If rates continue to drop, the periodic rate adjustment on an adjustable rate mortgage will lead to lower rates and smaller monthly payments.
Reducing the Loan’s Term
When rates drop, homeowners get the chance to refinance an existing loan for another loan, with means a much shorter term. You’ll see minimal changes in your monthly payment the process cuts a considerable chunk of time off your term.
Accessing Equity and Consolidating Debt
You should take some time to deeply consider your financial situation if you’d like to refinance to access home equity or consolidate your debt. It’s true that tapping into your home equity can be a simple way to cover major expenses, such as repairs, college education or remodeling. However, increasing the term of your mortgage is rarely a sound financial decision. Debt consolidation is another reason homeowners opt to refinance. You’re only advised to refinance in this case if you’re completely confident you’ll be able to resist spending and accruing more debt.
Ready? Let’s Talk.
Our team of loan experts at Assurance Financial are ready to help you refinance your mortgage—today! With our help, you’ll know whether it’s the right time to refinance. No matter your reason for refinancing, a loan officer at Assurance will be able to help you evaluate your current mortgage situation and offer guidance through the refinancing process. To learn more about refinancing at Assurance Financial, click here.