If you have had your home for a while, you might be wondering when would be a good time to refinance. This is an optional process done with your lender that pays off your current loan and starts a brand-new mortgage loan. It can be done to lower your interest rate because your credit has improved or to get some emergency cash by refinancing. Here are some different times when it is good to consider refinancing your mortgage.
You Need the Cash to Pay Off Debt
Refinancing your mortgage will often give you extra cash that you can use for emergencies, but it can also help you to pay off debt. If you are struggling with keeping up on all your debt, and you have been making the mortgage payments on time and in full each month, then you might be able to refinance the mortgage to get a cash-out plan. Since you are taking out equity, the cash should not be used for frivolous things. However, if you are responsible and use it to pay off some of your debt, it can be worth it and really help you in the long run. Once the other debt is taken care of, the mortgage payment and other bills should be caught up and much easier to manage.
You Want to Get a Lower Interest Rate
Having a high interest rate is challenging for a number of reasons. First of all, you end spending more overall for your home since the total cost you owe the bank is higher. This could mean taking longer to pay off your mortgage completely. Another reason high interest rates are difficult is due to the monthly bills being higher. If you decide to refinance and are able to get a lower interest rate, it can help you save money each month and over the long term. Instead of taking a cash-out plan for your debt or emergency funds, you can use the money you save to catch up on bills or get your car fixed.
You Don't Have a Fixed Interest Rate
You may also have a variable interest rate, where the interest rate can go up or down, depending on what the market does. Not only are you paying more now for a high interest rate, but it could start going up, requiring you to pay even more. If you have built enough equity on your home, you might qualify for a fixed interest rate. This means the interest will never change for the length of your mortgage loan so you at least know what to expect as far as monthly payments are concerned.
Also keep in mind that you can refinance your mortgage if you want to pay higher monthly payments in order to decrease the term of the mortgage. Speak to a mortgage broker about applying for a refinance.Share