Refinancing your mortgage can potentially save you thousands of dollars over the loan’s lifetime or provide opportunities such as tapping into your home equity. But timing is crucial to make it worthwhile. Here are some key situations when refinancing may be beneficial:
When mortgage rates drop. If mortgage rates have fallen significantly since you bought your home, refinancing to a lower rate can lead to big savings. Even a 1% rate reduction can give you substantial interest savings over a 30-year loan.
When your credit score improves. Improving your credit score from when you first got your mortgage means you may now qualify for a better rate. Lenders heavily weigh credit scores when pricing mortgage rates, so boosting your score can pay off when refinancing.
When you want to shorten the loan term. You may want to refinance from a 30-year to a 15-year mortgage to pay off your home faster and spend less on interest over the life of the loan. Just be prepared for higher monthly payments with a shorter loan term.
When you want to switch mortgage types. There are times when converting from an adjustable-rate mortgage to a fixed-rate mortgage makes sense. For example, you can do this to maintain interest rate stability if rates are projected to rise. Likewise, you may choose to refinance from a fixed-rate mortgage to an ARM when rates are falling.
When you need to tap into home equity. With a cash-out refinance, you take out a new mortgage for more than you currently owe and pocket the difference as cash from your home’s equity. This allows you to access those funds for home renovations, debt consolidation, investments, and more.
The potential savings, access to equity, and change to a preferable mortgage type make refinancing worth considering during ideal rate environments or shifts in your financial outlook.
Source: Forbes.com
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
