Is Refinancing Right for You?
Current mortgage interest rates have caused a national craze about refinancing. The Local Mortgage blog has spent quite a bit of time talking about refinancing and the buzz currently surrounding it, but you may still be wondering whether or not refinancing is the right thing for you to do. While it can be extremely beneficial in many situations, you may still be nervous about changing the terms of your home loan in Georgia.
In today’s blog, we will discuss how to determine if refinancing is right for you. If, after reading this post, you feel like you should refinance, then remember to use Local Mortgage. Our team of experts are licensed to help people in Georgia, Tennessee, and Colorado refinance their home loans. Feel free to get in touch with us if you have any questions, too!
Why Might You Refinance?
To determine whether it is right for you to refinance, it helps to first learn common reasons why people refinance their home loans. By understanding these reasons, you can determine why you would refinance, which will affect the structure of your uniquely refinanced mortgage. When you change the structure of your mortgage, you should always make it meet the needs of your specific situation.
The first reason many people refinance is to reduce their monthly payments. This is most commonly done by replacing the original mortgage with a new loan that features a lower interest rate. Thanks to the historically-low interest rates currently filling the mortgage industry, many people have the chance to reduce their monthly payments through refinancing.
Some people choose to refinance to reduce the term on their mortgage. Refinancing in order to reduce a mortgage term allows homeowners to make mortgage payments over a shorter timespan and ultimately own their houses sooner. This is also a good way to build home equity, since the reduced term means you will cut into the principal portion of your mortgage sooner. By refinancing to reduce your term, you may pay less in interest overall.
One final reason to refinance is to take advantage of home equity and get cash out of your home. This is called a “cash-out refinance,” and it provides an affordable way to free up some extra cash. Whether that cash is used to make home renovations, take a vacation, or start a business is up to you. This type of refinancing is a great way to get ahead by utilizing all of your assets.
Refinancing to Reduce Monthly Payments
As we said above, one of the most common reasons to refinance a mortgage is to reduce monthly mortgage payments. By replacing a current mortgage with one that features a lower interest rate, homeowners can drastically reduce their monthly payments and cut into the amount of interest they pay. When done correctly, this can help you save money on interest over time and reduce the expenses that accompany home ownership.
Refinancing to reduce monthly payments is one of the best options for people with mortgages that currently have high interest rates. If you took your mortgage out when mortgage rates were substantially higher, then you should consider refinancing to a lower interest rate. Interest rates have been consistently low for years now, and they continue to sink to lower levels. Even if you only took out your mortgage a year ago, you might be able to refinance to a lower interest rate now. Check the rates from Local Mortgage to see if average interest rates are lower than the rates on your current mortgage.
Another good time to consider refinancing to lower your monthly payment is when your credit improves. If your credit score was a little low when you applied for your mortgage, you may not have received the best interest rate possible. Despite this, there is a strong possibility that your credit score may have improved since you took out your mortgage. Check your score and if it has improved, then you might be able to secure a lower interest rate on your mortgage.
Decreasing the fixed interest rate on your mortgage is a fantastic way to substantially lower your monthly payment. In the first several years of your mortgage, the majority of your payments will go toward the interest on the loan. So refinancing is an excellent way to save money early in your mortgage while also making monthly payments more manageable.
Refinancing to Reduce Term
For homeowners who wish to have their house paid off sooner, refinancing can be a beneficial solution. Many people choose to refinance in order to reduce the term on their loans and make fewer mortgage payments overall. This an excellent refinancing option for people that have a strong financial foundation and feel capable of getting ahead on their mortgage schedule.
Most mortgages are initially structured with a 30-year term on the loan. Instead of making payments for all 360 months of that loan, you can refinance to decrease the number of months it takes to pay off your mortgage. As we mentioned above, this is an excellent way to build home equity because it can help you cut into the principal portion of the loan faster.
If you would like to refinance to reduce the term on your mortgage, then contact Local Mortgage today. Our team of experts has more than 50 years of experience helping people with their mortgages, and they can help you determine if refinancing to reduce your mortgage term is a good option for your situation.
Refinancing to Take Advantage of Home Equity
Refinancing to take advantage of home equity is another common reason to restructure your mortgage. This option might lower your monthly payment depending on your current interest rate and the new rate you receive. That said, the biggest perk of refinancing in this way comes in the form of a check. That’s right, when you perform a cash-out refinance, you walk away with a check!
If you are a homeowner, then it turns out that you are keeping money in your home, whether you know it or not! That money is kept in the form of home equity. With a cash-out refinance, you turn this asset into actual cash that you can spend as you see fit. To learn more about home equity, check out our blog post on the topic.
Our Calculator Can Help
Regardless of the reason you refinance, our refinancing calculator can help you decide when the best time to act would be. To learn how to use this calculator, check out Part 3 of The Comprehensive Guide to Our Mortgage Calculators. By reading our guide, you will be able to use our calculators to their fullest capabilities and see how refinancing would affect your monthly payment.
Contact Local Mortgage for Expert Advice
After reading today’s post, we hope you have a better understanding about whether refinancing is a good option for you. With today’s historically-low interest rates, refinancing is truly a powerful way to improve your financial situation.
If you feel like you could use expert advice about refinancing, then please feel free to contact us. Local Mortgage has helped many people in Georgia, Colorado, and Tennessee with refinancing, and we can help you too. Our team will listen to you and learn about your circumstances so that we can help you find the best way to refinance your mortgage.