Consider This: When to Refinance Your Mortgage
Most homeowners consider refinancing their mortgage at least once throughout the lifespan of their home loan. But, what exactly is mortgage refinancing? According to Bankrate…
When you refinance your mortgage, you replace your current mortgage with a new loan. The new loan might have different terms — moving from a 30-year to a 15-year term or an adjustable rate to a fixed rate, for example — but the most common change is a lower interest rate. Refinancing can allow you to lower your monthly payment, save money on interest over the life of your loan, pay your mortgage off sooner and draw from your home’s equity if you need cash for any purpose.
Now that you know what a mortgage refinance is, let’s get into the positive reasons you may consider refinancing:
Score a Lower Interest Rate
The number one reason homeowners decide to refinance is to secure a lower interest rate on their mortgage. Not only does this save them money in the long run and decrease their monthly payment, but it allows them to start building equity in their home sooner.
Improved Credit Score
Even if interest rates have not dropped in the market, if a homeowner has improved their credit score over the last few years, they may be able to reduce their mortgage rate.
Shortening the Loan’s Term
If interest rates are decreasing, there are a chance homeowners may be able to get a shorter loan term with little to no change in their monthly payment, allowing them to pay off their loan sooner.
Switching from an Adjustable Rate to a Fixed Rate
If a homeowner chose an adjustable-rate mortgage with great introductory rates when they initially financed their home, that rate may increase significantly over the years. By switching to a fixed rate while interest rates are low, homeowners can protect themselves from future increases.
Cashing Out Home Equity
If a homeowner has a big purchase or payment on the horizon, such as funding a wedding or going back to school, their best option may be to use the equity they’ve built in their home to borrow money at a lower cost. In this case, they would have to refinance their mortgage to get access to the equity.
If you’re in the Denver, CO area and considering refinancing your mortgage and would like an expert’s opinion, DaVinci Realty can connect you with trusted professionals to guide you in the right direction. Contact us today to inquire!