What Are the Best Reasons to Refinance Your Home Loan?
Refinancing lets you get a new mortgage instead of your old one. But why exactly would you go through all the hassle of getting a mortgage again? Here are some of the top reasons.
Lower Your Monthly Payment
If you're struggling to pay your bills each month, it may be helpful to try to lower your monthly mortgage payment. This will help you free up cash flow to make sure you pay your mortgage and other bills on time.
There are two ways refinancing can lower your payment. The first is by stretching out your loan to a longer term. For example, if you're five years into a 30-year mortgage and refinance into a new 30-year mortgage, you're stretching your remaining payments over 30 years instead of 25.
The other way to lower your monthly payment is to get a better interest rate. If you borrow the same amount of money for the same length of time but at a lower interest rate, your payments will be lower because you won't have to pay as much interest.
Save On Interest
While lowering your monthly payment is a reason to get a lower interest rate, you can also get a lower interest rate just because you'd rather keep more of your money. There are two ways you might get a lower interest rate.
First, interest rates rise and fall based on economic conditions. If the economy has changed and interest rates are lower than when you got your mortgage, you may be able to refinance to get a lower rate.
Second, interest rates depend on your credit. In addition to deciding if you qualify for a mortgage, your credit score also determines your interest rate. If you've been able to improve your credit score since you got your mortgage, you may now qualify for a lower rate than you did originally.
Get Rid of Your Mortgage Faster
Another reason to refinance is to get rid of your mortgage faster. One way to do that is to see if you can get a lower interest rate. If you do get a lower rate, instead of just paying the new lower payment, you can keep making your old payment. That will pay your principal down faster.
Another way to do it is to get a mortgage with a shorter term. This will increase your monthly payment and force you to pay more than you would have if you don't trust yourself to make extra payments on your own.
To learn more, contact a local refinancing home loan program today.