Why Refinance Your Mortgage?
October 14, 2022 | Posted by: Keith Leighton
Why Refinance Your Mortgage?
When a homeowner refinances their home, they are simply opening a new mortgage with a new lender and using that money to pay off the original mortgage lender. They continue to pay their mortgage, but to their new lender, at hopefully a lower interest rate or with a shorter loan term.
Refinancing your house, like most parts of the home buying and owning process, can be complicated. You might have a lot of questions, like when the best time to refinance your mortgage would be and how to actually make sure you’re getting a good deal. Here are some good reasons to refinance your mortgage:
Lower Your Interest Rate
If you do your research on your home’s refinance, you should be able to get a better interest rate on the money you owe. Not only does this mean you’ll be paying less on your month-to-month payments, you’ll be able to pay off your debt sooner and not pay as much in interest on your home in total.
Shorten Your Loan Term
Getting a shorter loan term is another great reason to refinance. If you move to refinance your home loan and you can afford the extra few hundred dollars on your loan payment, you can end up paying off your mortgage faster and paying less in interest overall. Granted, some of these shortened loan terms mean up to 25% more on your monthly mortgage payments, which might not be sustainable for every homeowner. If you don’t want to go through the hassle of refinancing your loan but want a shorter loan term to pay less interest, consider paying a bit more than the minimum payment every month. That amount of money will pay directly onto your principle, and help you pay off your mortgage faster.
Move From an Adjustable Rate Mortgage to a Fixed-Rate Mortgage
An adjustable rate mortgage is one that starts out with a lower interest rate for the first few years of your loan and then adjusts the rate depending on the market, which usually means it increases over time. One way to get rid of these inevitable high interest rates is to refinance to a fixed-rate mortgage that has a locked in (and hopefully satisfactory) interest rate. As you can see, these can be excellent reasons to refinance your home, but they depend largely on a homeowner’s current financial situation. That’s why it’s important to understand when you should be refinancing your home.
There are some key factors to consider before refinancing, that’s where a DLC Ideal Mortgage professional can help. Contact your DLC Ideal Mortgage expert today to find out if refinancing makes sense for you.
