Although most homeowners are currently refinancing to take advantage of historically low interest rates, there are other reasons they may want to consider it.
If a homeowner is currently locked in a 30-year mortgage, but feels they could pay their home off faster, refinancing to a 15-year could earn them a lower interest rate and allow them to avoid paying another 15 years of interest. However, it’s important to remember that a shorter loan term will likely lead to an increase in monthly payments.
2.Interest rate options
Another popular reason for refinancing is to switch between adjustable and fixed-rate mortgages. If the homeowner is looking for a concrete monthly expense, fixed-rate is the way to go. If the homeowner is looking for a potentially lower interest rate and monthly payment, an adjustable-rate mortgage (ARM) might be that answer. It’s important for the homeowner to take their personal financial needs and market projections into account before making this decision.
Lastly, some homeowners refinance to tap into their home equity. According to Amerine, “A lot of people are taking advantage of their equity to take cash out for whatever their goals may be: paying off other debt, upgrading their homes, putting in pools, buying vacation homes, going on vacation, or whatever they’d like.” As a homeowner’s property value rises, so does their equity.
If you are thinking of refinancing reach out to me, I have a list of trusted and preferred lenders who can help you.