Four Financially Sound Reasons to Refinance Your MortgageInk Well Mag January 24, 2017 0 COMMENTS
Various reasons can make a homeowner pay an existing mortgage and replace it with a new one. Common reasons to refinance include plummeting interest rates and the need to consolidate debt. If you’re considering refinancing, it’s important to determine whether your reason for refinancing offers you real benefits. Here are four financially sound reasons to refinance your mortgage.
1. To Lower the Interest Rate
Most homeowners refinance their mortgage in a bid to secure a lower interest rate. Reducing your home loan’s interest rate can help you save money, build equity faster, and lower your monthly installments. A mortgage lender can help you do the math to determine if the current mortgage rates in Utah would justify refinancing.
2. To Convert Between Adjustable-Rate Mortgages and Fixed Rate-Mortgages
Refinancing can be a smart way of converting between ARMs and fixed-rate mortgages. Periodic rate adjustments often make ARMs rates higher than the rates available through fixed-rate mortgages. Converting an ARM can help you lower your interest rate and eliminate concern over future rate hikes.
Conversely, you can benefit by converting your fixed-rate mortgage to an ARM in a plummeting interest rate environment. Periodic rate adjustments will consequently translate into decreasing rates and smaller monthly payments.
3. To Take Advantage of Your Improved Credit Score
Loan rates can vary by a significant percentage based on your credit score. An excellent credit score can help you get the best mortgage rates. An improved credit score may also help you qualify for a lower rate even when mortgage rates in Utah haven’t gone down.
4. To Shorten the Loan’s Term
When rates fall, you can have the opportunity to refinance your existing mortgage for another shorter term loan. Such refinancing significantly cuts the length of the mortgage without a significant change in the monthly payment.
Refinancing is typically a smart financial move if it helps the homeowner build equity more quickly, shortens the term of the mortgage, or reduces the mortgage payment. Before refinancing, carefully consider your financial situation and do the math on your expected savings.