Refinancing your mortgage can be a great way for you to save money. Your current loan is paid off and replaced with a new one when you refinance. In the transaction, several things about your loan terms could change including your interest rate, the length of your loan, the loan balance itself and even the type of loan you have.
Why Should You Refinance?
There are many benefits and reasons why you might consider refinancing your mortgage. Here are the most common reasons people decide to refinance:
Lower Your Interest Rate
An optimal time to refinance for a lower interest rate is when rates are low. You could potentially save thousands of dollars over the full term of your loan. If you are someone who has recently improved your credit score, this may also be a good time to lower your interest rate as well.
Change Your Loan Type
Do you have an adjustable-rate mortgage? You may be eligible to switch to a fixed loan. Reducing your loan term from a 30-year loan to a 15-year, or 20-year loan may be an option for you too.
Get Rid of Mortgage Insurance
You may be able to eliminate your private mortgage insurance (PMI) which could ultimately save you hundreds of dollars each month in your mortgage payment.
Tap Into Your Home's Equity
A cash-out refinance is a refinancing of an existing mortgage loan, where the new mortgage loan is for a larger amount than the existing, and the borrower receives the difference between the two loans in cash. Basically, homeowners do cash-out refinances so they can turn some of the equity they've built up in their home into cash giving them more flexibility to:
Finance educational expenses
Make large purchases
Take a dream vacation
Get money for life's unexpected setbacks
Pay off high-interest credit card debt
And much more!