Refinancing may provide new benefits depending on your situation. One of our loan consultants can help.
Deciding to Refinance
Traditionally, the decision on whether or not to refinance has meant balancing the savings of a lower monthly payment against the costs of refinancing.
With traditional refinancing, the most often cited rule of thumb is that the interest rate for your new mortgage should be at least two percentage points below the rate of your current mortgage for refinancing to make sense. However, it can be worth your while to refinance to obtain a smaller reduction in interest rates. Your Loan Consultant can help you review your options.
You may qualify to refinance for more than the balance remaining on your old mortgage — in effect, tapping your home equity, or “cashing out,” in mortgage speak.
Another use for the extra cash is to pay off any higher rate loans you may have.
Trade Your Adjustable Rate Mortgage (ARM) for a Fixed Rate
By switching to a fixed rate loan, you can lock in an attractive rate for as long as you own your home.
There are certain cases, however, where an ARM makes sense. If you are fairly certain you’ll be moving within five years, you may save some money — and avoid rising payments — with a five year ARM.
Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the mortgage. This offers two advantages: you may build up equity faster, and pay far less in total interest over the life of the loan..