With home prices rising steadily, many homeowners are asking whether or not they should refinance their mortgage. Sure, it’s a great time to lock in a lower interest rate on your loan, but let’s have a look at some other reasons why refinancing your mortgage might be a smart move right now.
5 Reasons Refinancing Your Mortgage Makes Sense
When you signed on the line for your loan it probably felt like it was forever, but the world has changed and so have you. Here are some ways refinancing your home can help you achieve your goals while protecting what you have already invested.
1. You Can Lower Your Monthly Payment
A major reason to consider refinancing your home is to lower your monthly mortgage payments. Switching to a longer 15-year or even 30-year fixed-rate mortgage means a lower monthly payment on the same loan amount—every month, starting now, even at the same interest rate.
Your home will continue to appreciate, so going long on a loan is a great way to free up much-needed cash every month to start a family, buy a car, or fund home improvement projects.
2. You Can Build Equity Faster
You worked hard to find your home, put a downpayment together, and secure a mortgage. It was tough making those early payments, but work is good and your finances are looking up. Now you’re ready to truly own your home!
By switching to a shorter 15-year or 10-year fixed-rate loan or consolidating a split mortgage into one loan, you’ll possibly pay a little more each month. But more of that money will go towards paying down your loan’s principal, rather than interest, even at the same rate you were paying.
You’ll pay off your home sooner. That means more money to use on other things sooner, and more cash in your pocket if you decide to sell. Even if you’re all set to stay put, it means you’re building a more secure future day by day.
3. You Can Disarm Your ARM
Adjustable-rate mortgages are great for getting a foot in the door, but times are changing. Switching to a fixed-rate mortgage gives you the security of knowing what you’ll need to pay each month for years to come. Plus, more of your money will be going into your home, rather than to service the cost of the loan.
But let’s say you’re not ready to sign up for a traditional fixed-rate loan just yet. If you’ve been in your house for a while, you’ll likely be able to negotiate an ARM with more favorable terms, consolidate two ARMs into a single loan, or cut loose a looming balloon payment!
4. You Can Get Cash Out
With house prices rising fast, there’s a good chance you own more of your home as equity than you expected to. That’s money you can put to use right away through a cash-out refinance, where you renegotiate your mortgage to include some or all of the equity you have earned in your house to date, often at a similar rate or term to your original loan.
Good places to use money from a cash-out refinance include improvements or renovations that work to further increase your home’s value, funding a college education, or even purchasing another property.
5. You Can Get Smart About Debt
Another great reason to refinance your mortgage is to consolidate debt. By using funds from a cash-out refinance to pay off a college loan, car loan, or credit card, you’ve effectively rolled high-interest, variable-rate debt into a single, predictable fixed monthly payment.
Additionally, you’ll continue to build equity in a valuable fixed asset—that you can also live in. Let’s face it, if you’re going to owe money, your home loan is the best place to do it.
Is Refinancing Right for You?
There are plenty of reasons why refinancing your mortgage makes sense—like taking advantage of lower rates. Done properly, it’s a great way to put the value of your investment in your home to work for you in other ways.
A smart refinance can secure your future, add to your options, and improve your quality of life.
If you own a home in the Cleveland/Athens area, you’ve got a very good thing going. House prices are booming as people look further afield for value, lifestyle, and small-town charm. It’s a great place to call home—we do!
Think Bowater for Refinancing
If you are looking to refinance your home, consider Bowater Credit Union. At Bowater, you’ll always get great rates, flexible loan terms, and superior local service.
When you apply for a loan at Bowater Credit Union, you also get:
- No down payment loan options
- No application fee
- Your application is reviewed by a local loan officer
Borrowing from a local lender that’s invested in your community means you’re more than just a number. You’re part of our family and we’re here to help you afford the home of your dreams.
Click below to learn more about mortgage refinancing at Bowater!