5 Reasons to Consider a Mortgage Refinance
There are many reasons to refinance your home, the most obvious of which is to obtain a lower interest rate. But that’s not the only benefit of a refinance program.
Lower interest rate
This may result either in a lower monthly payment or a shorter term for your mortgage loan.
To consolidate debt into one loan
This helps manage and control your debt and often allows you to pay it off sooner. Sometimes referred to as a cash-out refinance, the equity in the home is used to pay for expenses such as tuition or to consolidate high-interest loans.
To reduce the term or length on your loan.
This can save considerably on interest. For example, some homeowners refinance with a shorter-term loan and a lower interest rate without a significant change in monthly payments and therefore pay off the loan faster.
To reduce or alter risk
For example, when interest rates are higher, homeowners may refinance with an adjustable rate mortgage, which offers lower interest rates during the loan’s early years. When rates decrease, homeowners may refinance to a fixed-rate loan to know what the mortgage payment will be for the life of the loan.
To build equity
Choosing to refinance with a shorter-term mortgage builds up home equity faster, because with shorter-term loans, more of the monthly payment goes to the principal.
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