In layman’s term, refinancing simply means switching to a new mortgage deal on your home with the goal of getting lower interest rates and more flexible stipulations. But is it worth the legwork, the online and offline research, and the paperwork that lands on your desk? If you are one of those skeptics who is still caught between the fences, here’s 4 great reasons why you should be thinking of refinancing your home this year.
Current Mortgage Rates are Rising
If you have an adjustable rate mortgage plan, it can adjust higher than what is being offered by fixed-rate contracts. This is a sensible time to refinance your home to a fixed rate plan. Fixed rates are also ideal for homeowners who are planning to stay in the property for more than seven years.
Current Mortgage Rates are Falling
Falling mortgage rates are another reason why you should consider switching your loan contract. An adjustable rate mortgage will better serve you during times of market decline. It’s also a more feasible option for people who will only be residing in the property for no more than a few years.
Lower Your Monthly Rates
There are different ways you can lower your rate, the simplest being refinancing to a lower interest-bearing contract. The second way is by changing the mortgage terms. For example, if you are holding a 10-year mortgage plan, you can increase it to a 20-year plan, which effectively distributes the interest rates over an X period of time thereby lowering your monthly payments. Lastly, you can opt to refinance with an interest-only loan, which only requires you to pay the interest as the minimum amount for a specified period of time.
Take Funds from Your Home
The value of your property can be accessed similar to how you access funds in a bank account. You can access equity either via a home equity loan or a cash-out refinancing plan. Homeowners choose to get funds from their property when they need to finance a renovation project, which ultimately further adds value to the house.
Figuring out when you should refinance your home’s mortgage is the next tricky part. The decision depends predominantly on your personal situation including how long you will be staying in the property, what financial goals you have for your future, and the current and future conditions of the market governing mortgage rates. Use the four guidelines above as your foundation going further.
The information in this article is credited to Sente Mortgage, a home loan lender that specializes in refinance in Austin.