4 Compelling Reasons To Consider Mortgage Refinancing
As the name suggests, mortgage refinancing refers to getting a new mortgage by trading in the old loan. The new loan enables the bank to pay off the existing mortgage. Generally, the new loan offers improved terms and conditions. For instance, you might want to remove a co-signer who is no longer committed to repaying the loan. With that said, here is why you should consider mortgage refinancing today.
1. Access Better Mortgage Rates
When taking loans, the interest rate is an aspect that you can't afford to overlook. Therefore, as a rule, it is prudent to take advantage of lower rates whenever the opportunity presents itself. That is why you should consider refinancing if your lender's mortgage rates have dropped significantly. The same applies if your credit status has improved, making you eligible for lower mortgage rates.
2. Predictable Costs
Mortgage refinance is an excellent way of making loan costs more predictable. For instance, if you have an adjustable-rate mortgage (ARM), refinancing can allow you to switch to a fixed-rate loan. This means that you will pay a consistent rate for the remaining repayment period. Then, even if the market rates increase, you won't have to worry about paying more.
3. Shorter Repayment Period
As you are perhaps aware, the faster you repay a loan, the more money you will save. After all, faster repayment means paying less interest down the line. For instance, refinancing a 20-year mortgage into a 10-year fixed-rate loan translates to not paying interest for 10 years. You might even have the rate reduced, enabling you to pay the outstanding amount faster without a significant increment in your mortgage payments.
4. Borrow Money
Did you know that home equity can serve as collateral when borrowing money? Now that mortgages tend to have cheaper rates, not to mention they are tax-deductible, you can see why refinancing offers an excellent way to borrow.
Keep in mind that you can spend the funds in whatever way you like. However, if an emergency fund is what you have in mind, the amount will undoubtedly come in handy should the need arise. Also, you can choose to repay your debtors and end up paying less interest by consolidating all your debts.
There's no doubt that today's economy is full of uncertainties, more so now that there's an ongoing coronavirus pandemic. The good news is that mortgage refinancing can offer some financial breathing space. With the above in mind, it's evident that refinancing your mortgage is a step in the right direction. Reach out to a company like Choice Mortgage to discuss refinancing.