Should You Refinance?
It’s not easy being on the fence when deciding whether or not you want to refinance your home. Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why a homeowner would choose to refinance, but is it a good idea for your specific needs?
The more you know about your options and how to choose the right time, if any, to refinance your mortgage, the better prepared you could be to make an important decision about your financial future. These are a few reasons why you might want to refinance now – while the getting is good.
Interest Rates are Near Historical Lows
Interest rates fluctuate periodically. The 30-year mortgage rate spiked as high as 18.6% in 1981 and fell as low as 3.3% in 2012. Today’s rate is now near historic lows, and in August 2020, actually fell to 3.19%.
Depending on when you purchased your home, there’s a good chance that the current interest rates are lower than your existing mortgage.
That means that now may be the perfect time to refinance your mortgage, before rates rise again and potentially eliminate one of the biggest benefits for refinancing a mortgage – lower interest rates and lower overall payments on your mortgage.
You Want to Reduce Your Loan Term
Circumstances change. Perhaps you have a better job or maybe you’ve inherited money from a relative. No matter the reason, refinancing from a 30-year mortgage to a 15-year mortgage could earn you significant savings on your home.
On the other hand, some people need to extend the terms of their mortgages to match their budget’s capacity every month. In this case, you might consider going from a 15-year mortgage to a 30-year mortgage. It will cost considerably more in the long run. However, it may be the difference that allows you to keep your home when things get tight.
Switching from an Adjustable-Rate Mortgage to a Fixed-Rate Mortgage
This is a worthwhile consideration for people who have adjustable-rate mortgages facing reassessment soon. With interest rates as low as they are, if you’re an adjustable-rate mortgage holder, you could end any speculation or worry you may have about fluctuating rates by switching to a fixed-rate mortgage.
Initially, you may pay a little more in interest but could gain incredible peace of mind, knowing your interest rate can’t suddenly rise sufficiently to price you out of your home.
Home mortgage refinance loans could be the perfect solution for many mortgage woes. The more you know about your options, the more informed your decisions will be about your personal need for a refinance loan and the type of loan that could meet your needs without creating pain in other areas of homeownership.
