If you’re considering a refinance, it’s likely you either want to take advantage of today’s low interest market or need to pull some cash out of your home’s equity. Regardless of your needs, WinPrime has experience working with both situations. Let’s look through some of the reasons why you might want to refinance.
Lower Interest Rate
At WinPrime, we love saving people money. And a great way to save money on your home loan is to refinance for a lower interest rate. When you’ve locked in a rate for your mortgage previously and then later see interest rates drop, you may want to refinance in order to save yourself money in the long run.
Just a small drop in interest rates can lower your monthly payment significantly. For example, say you bought your home for $300,000 with a 5% interest rate and now carry a remaining balance of $275,000. Your monthly payment would be around $1,476. If the interest rates fell to 4.5% and you refinanced, you could potentially have a monthly payment of $1,340, saving you $136 per month. That could be up to $8,160 in mortgage payments over the next five years!
Consolidate Your Debt
Are you feeling financially squeezed with the amount of bills coming your way each month? Refinancing your home loan is a great way to get the money you need to consolidate all those bills and get rid of their high interest charges. These mortgages are sometimes called “cash-out” refinancings, because you are getting cash out of your home’s equity to use for other things. By consolidating your debt into a refinanced mortgage, you can save time and money.
Consolidating your debt by refinancing is simply moving all your debt into one place: your mortgage. Doing this gets rid of differing due dates and various companies you owe to, putting all your loans and debt into one, easy to remember payment.
In addition, your new mortgage interest rate is typically lower than the interest rates on your credit card accounts. By getting rid of the high interest rates on your current credit card debts, and combining all your bill payments into one, you’ll end up paying less each month.
Get Cash From Your Home
If you’re looking for some extra cash, whether it’s for home improvements, college tuition or paying off some debt, refinancing your home to take advantage of its equity can be a way to get the funds. You may hear the term “Cash Out Refi” to describe these types of home loans. To get cash from your home, you can do a couple of things:
- You can get a line of credit (Home Equity Line of Credit)
- You can refinance your mortgage and get the extra cash at closing (Cash-Out Refinance).
Why Get Cash From My Home Loan? – One of the reasons people refinance to get cash from their home equity is to pay for home improvements. These improvements can increase the home’s value and make it more enticing to potential buyers when the owners eventually sell their home.
There are also several other types of reasons homeowners may refinance to get cash from their home. Life is full of the unexpected and if you ever face a large payment that you didn’t plan for, such as medical expenses or unemployment, or if there’s a big ticket purchase on your agenda, like education tuition or a new car, your home’s equity could help you pay for these expenses. Like many home buyers, you may have chosen an adjustable-rate mortgage when you first bought your home to take advantage of low monthly payments and interest rates.
However, as the fixed part of your loan comes to an end, you may find that your payments will be rising due to increased interest rates. No one enjoys paying more, but how do you keep your payment from rising? Consider refinancing your home loan to a fixed rate mortgage, or one with a longer term.
Keep Your Payments From Rising
If you’re looking to prevent your mortgage payment from rising, you have two options:
- Refinance to a fixed rate mortgage, OR
- Refinance to another adjustable-rate mortgage.
How do you know which option is right for you? It depends on how long you’re planning on staying in your home.
If you’re planning on staying in your home for an extended time, refinancing to a fixed-rate mortgage is a great way to keep your payment from rising, giving you stability for the rest of your loan’s life.
However, if you’re only going to be staying in your home for a short period of time, refinancing to another ARM may be a financially-savvy decision. This way you can still stop your current mortgage payments from rising, while being able to take advantage of an even lower interest rate for your new home loan.