3 Reasons to Consider Refinancing Your MortgageWith rates at an all-time low, homeowners are considering refinancing their mortgages. Before making a decision, it is important to ask yourself a few questions to determine if refinancing is right for you. Here’s a list of three reasons you may want to consider refinancing.
Will the interest rate benefit me?
The most beneficial reason to refinance your home is to get a lower interest rate. This helps you in two ways. First, if you’re paying a lower interest rate on the same size loan, your payments will be lower, leaving more money in your pocket each month. Second, over time, you’ll spend a lot less money on interest, too. In other words, there’s a short and a long-term benefit. As a rule of thumb, look for a rate drop of at least 2% to make it worth the hassle and fees associated with a refinance.
Can I pay off my mortgage sooner?
Why would you ever want your mortgage payments to go up? Well, what if an affordable, increased loan payment meant you could pay off your home in half the time. If you the higher payment of a 15-year loan versus a 30-year loan fits into your budget, you’ll save on interest and, of course, you’ll own your home outright sooner.
Can this help consolidate debt?
If your consumer debt is getting harder and harder to manage, and you have equity in your home, a refinance in which you pull some equity out of your home by taking some of the loan proceeds and paying off your debt may be your answer. When you balance the double-digit interest rates on your credit cards against the single-digit rate on your mortgage, you could save money. The challenge, obviously, is resisting the temptation to run that consumer debt back up after the refinance.