Why Refinance?

Refinancing a mortgage can be a great option for homeowners. This finance tactic involves paying off an existing loan and replacing it with a new one. If you wish to reduce monthly payments, shorten the term of your mortgage, or build more equity then refinancing may be a worthy opportunity for you. Here are the top 5 reasons you should look into refinancing your mortgage:

1. Convert to a Different Rate Type

There are two main types of mortgage rates, adjustable rates (ARM’s) and fixed rates. If you currently have an ARM and are experiencing rate increases due to periodic adjustments then it may be best to switch to a fixed rate. This change is most suited to homeowners who plan to stay in their homes for many years as you can acquire a better interest rate and ensure you’re protected against future rate increases. On the other hand, if you’re experiencing a falling interest rate trend and currently have a fixed rate then switching to an ARM could be the better choice. When rates continue to fall, the periodic adjustments associated with ARMs actually can result in decreased rates and smaller monthly payments. This switch is most suited to homeowners who only plan on staying in their homes for a few years who aren’t as concerned with future trends.

2. Shorten the Term

Refinancing your mortgage has the potential to cut your mortgage term in half! This phenomenon is the result of refinancing with a lower interest rate and reducing the total amount you are required to pay back to the lender. Shortening the term of your investment is a great option for any homeowner as it releases them from their obligation that much sooner.

3. Consolidate Debts

If you have many different outstanding debts and would prefer to simplify your payments refinancing can help by tying them all together. This is a good option for you if you have a good amount of home equity as it allows you to pay-out high-interest debt. By consolidating your debts you can access a rate that can be lower than a personal line of credit! This is the best option for homeowners who struggle with large monthly payments. Refinancing and consolidating debts allows you to make one reduced payment per month and improve your credit.

4. Access Equity

By refinancing your mortgage you could access up to 80% of the value of your home less the amount outstanding on your mortgage! This can be done by breaking your mortgage agreement and refinancing, taking out a home equity line of credit, or blending and extending your current mortgage. The equity you could access provides opportunities to do that renovation you’ve always wanted or taking advantage of an investment opportunity.

5. Acquire a Better Interest Rate

The most common reason to refinance your mortgage is to take advantage of a lower interest rate. In the best scenario your interest rate could be reduced by 2%! This reduction can help save money over time, increase the rate by which you can build home equity, and decrease monthly payments. Though there is a penalty to break a mortgage contract the lower rate usually ends up saving money over time.

Refinancing is an attractive option with multiple benefits. Book an appointment with your mortgage advisor today to discuss your refinancing options and see if it is a good fit for you. It could result in saving you money and freeing you from your obligation that much sooner!