You may have been thinking about refinancing your home for a while but thought the opportunity passed you by. However, rates are continuing to hover at near-record lows, making now an ideal time to consider refinancing your mortgage — especially if one of the following four reasons is relevant to you.
- Lower Interest Rates
If mortgage rates are between 0.75 and 1 percent lower than your current mortgage loan, it’s worth exploring your refinance options. One percent might not seem like all that much, but when you multiply it by the cost of your home and the life of your mortgage loan, the numbers add up fast. Whether your mortgage is for 15 or 30 years, the savings on interest could easily be tens of thousands of dollars, if not more.
- Switching Loan Type
If you have an adjustable-rate mortgage, also known as an ARM, now, while the rates are still low, is the perfect time to refinance to a fixed-rate mortgage — before your current adjustable rate goes up on you. The truth is that no one knows when or how much rates will go up when they do. This is insurance against the potential of rising interest rates, that could end up costing you big the next time your rates “adjust.” Since rates are currently near record lows, it means they will likely only go up from here. Even if it isn’t on your first adjustment, avoiding a rate hike before your next assessment can mean huge savings for you.
- Changing Terms
Your loan terms matter — more than you may realize when it comes to how much you will pay to own your home. Refinancing will allow you to change these terms to fit your financial needs and goals better.
For example, with a drop in rates, you may able to shorten your current term by five years and keep your current payment relatively the same. In this instance, your monthly expense would be unchanged, but you will pay off your mortgage quicker, potentially saving tens of thousands of dollars in interest.
Or, you could extend your loan term. By lengthening your term, your monthly payment will likely decrease – providing you more money each month to manage your current expenses. It’s important to note that extending your loan term will most likely increase the total amount of interest you pay on your loan.
- Upgrading Your Home
Not only are interest rates low for people interested in buying or refinancing, but home values are also increasing throughout much of the country. This is incredible news if you’re interested in making upgrades to your home. It means you may be able to make improvements with better rates and terms than with a traditional home equity loan or HELOC.
A cash-out mortgage allows you to refinance your home and take out a portion of your home’s equity at the same time. You can use this money for a wide range of home improvement projects such as a bathroom renovation, kitchen upgrade, or adding a pool.
We’re Here to Help!
Refinancing your home is a big decision to make. There are many options to consider, such as loan types, terms, and rates, and how these will affect your current financial situation and long-term goals.
Our home loan experts are ready to answer all your questions and work with you one-on-one to find the best option for your unique situation. Simply stop by any branch location or give us a call at 800-997-7919 to get started today.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.