Many people are discouraged from refinancing their mortgage because of how much effort and resources it takes to get it done. However, pushing through the tough task and getting a new loan might be one of the most financially beneficial things you can do today.
Here are five good reasons to consider refinancing your mortgage right now.
GET A LOWER RATE
With interest rates at historic lows, you’d likely save a lot of money in the long run if you can lock in a lower rate on your mortgage through refinancing. Getting a lower rate would be most beneficial for homeowners whose mortgage is 10 years old or older.
If your mortgage is only a year old, consider refinancing if you can get a new rate that’s significantly lower than your current one.
ARM TO FIXED-RATE
If your first mortgage is an adjustable-rate mortgage, you’d probably want to switch to a fixed-rate mortgage through refinancing given how low rates are now.
While it’s possible that you’ll get an even lower rate next year if you stick with your adjustable-rate mortgage, keeping your rate consistently low and unchanging throughout the life of the loan is advisable. That way you won’t have to worry about sudden increases in the future.
SHORTEN YOUR TERM
Refinancing is also a good idea if you’re planning on paying back your loan earlier. Say, you still have 25 years left on your 30-year fixed-rate mortgage, switching to a 15-year one would shorten your term and save you a ton in interest.
ACCESS YOUR HOME EQUITY
For homeowners whose home has gained value since buying it, a cash-out type of refinancing is worth considering. In this process, you will have to take out a larger loan but you will receive a portion of the value your house gained over the years.
CANCELING MORTGAGE INSURANCE
If you paid less than 20% as a down payment, you were likely stuck paying for private mortgage insurance. You can cancel that insurance by refinancing your mortgage.
However, experts warn that getting rid of your private mortgage insurance alone may not be a good enough reason to refinance. Remember that the process comes with other fees that can get expensive.
In the end, the cost of refinancing might just outweigh the money you’ll save with the lower rate you’ll get.