So, you bought your dream home, and with it comes the responsibility of a mortgage–one of the most significant financial decisions in your life. Every month, you pay down your loan, and depending on the market, you could eventually refinance to get a lower interest rate. But what does it mean to refinance your loan? And when is a good time?
What Is Refinancing?
When refinancing your mortgage, you are essentially replacing your original mortgage with a new mortgage. There are many reasons people refinance their mortgages. Sometimes you can get a better interest rate now that time has passed, you could also use some of your home’s equity for a second mortgage, or you could lower your monthly payments, just to name a few.
Advantages of Refinancing
Refinancing your mortgage can be helpful in many ways. Maybe when you initially obtained your mortgage, interest rates were high, but now you could take advantage of lower rates. Whether you are in a fixed or variable rate mortgage, you could switch if the loan style you have isn’t working for your family, life, or budget. The same goes for if you are in a 30-year mortgage and want to switch to a 15-year loan. If you want to pay off your mortgage sooner or use the equity your home has accrued, refinancing your loan can help you achieve these goals. But keep in mind, you are qualifying for a new loan, so there will still be closing costs.
When Should You Refinance?
Now is a great time to refinance because interest rates are low, and you should take advantage of them. NerdWallet reported in a survey with The Harris Poll that 17% of homeowners have already refinanced their mortgage, and 31% are considering it in the future. Many personal factors will help determine if now is the right time for you: how long you intend to stay in the home, if you have acceptable credit, or your financial goals.
If you are considering refinancing your mortgage, make sure to contact one of our Loan Advisors today.