Low mortgage rates have recently unleashed a huge trend of refinancing, which has served as a windfall for millions of consumers. However, what will happen after those rates are gone? This is all the more reason to refinance your mortgage. This can accomplish different things for different people, and the more you know about what it can do, then the more likely that you can use it to your advantage. I recently read an article that shared some compelling reasons to refinance your mortgage, listed below:
Reduced interest rates: A drop in market rates creates a compelling opportunity to refinance, yet you can still lower your rates by refinancing, even if interest rates are generally not lower than those on your current mortgage. If you can afford the higher payments that come with a shorter mortgage, then you might be able to refinance from a 30-year to 15-year loan. If you only expect to be in your current home for a few more years, then an adjustable rate mortgage could be right for you.
Reduced long-term interest: Shorter mortgages carry both lower rates as well as interest for fewer years. Even if you aren’t able to lower your mortgage rate, you could still be able to achieve significant long-term savings by switching to a shorter mortgage.
No mortgage insurance premiums: Often-times, mortgages that allow low down payments also require paying for mortgage insurance. Yet after you’ve built more equity in your home, then you may be eligible for a type of loan that doesn’t require mortgage insurance.
More affordable monthly payments: By stretching your payments out over longer periods, you can reduce those payments. However, lengthening your loan means paying more total interest in the long run. Yet if that’s the only way you can make your mortgage affordable, then it could be a good reason to refinance.
Switching from an adjustable rate to a fixed-rate loan: Regardless of why you’ve chosen an adjustable rate mortgage, if you plan on being in your home for the long-term, then stabilizing your monthly mortgage payments by switching from an adjustable rate to a fixed-rate loan could reduce your financial risk.