If you’ve been living in your home for a while it might be the right time to consider refinancing your mortgage. There are many good reasons to consider refinancing, including lowering your interest rate, consolidating your bills, shortening your loan term, switching from an adjustable to a fixed rate or taking advantage of your home’s equity.
Switch From Adjustable to a Fixed Rate, or to a New ARM.
If you plan on staying in your home at least five years, now might be an excellent time to switch to the payment security of a fixed-rate loan. Or, if you plan on moving in less than three years, consider refinancing to a new ARM to take advantage of the low starting rates that may be available. Even if the new ARM’s rate rises at the first adjustment interval, the starting rate may be low enough to offset any increased payment costs.
Tax-free Cash Via Equity
Many borrowers have built up significant home equity over the years through appreciation and principal reduction. These borrowers may refinance an existing mortgage to a larger loan amount, with the additional funds used for any purpose – investment, car, tuition, debt consolidation, etc. And, unlike any other consumer loan, the interest paid on the “cash out” could be 100% tax deductible! (Consult your tax advisor.)
While mortgage interest rates remain at record lows, many homeowners’ thoughts turn to refinancing. And with good reason! When your existing loan is replaced with one that has a lower rate, you benefit from lower monthly payments.