June 21, 2021
When Is The Best Time To Refinance
Have you considered what it takes to refinance your home? We’ve broken down everything you need to know about refinancing including what it means and when you should do it. Let’s dig in!
What is Refinancing?
Refinancing your mortgage means paying off an existing loan and replacing it with a new one. Basically, you’re trading in an old mortgage for a new one. When you refinance, your bank or lender pays off the remainder of your current loan with a new one.
Why Should You Refinance?
There are a variety of reasons that one might choose to refinance their house. The most popular reasons are to take advantage of lower interest rates, shorten a payment term, or turn equity into cash. Let’s explore some of these reasons:
Refinance to Secure Lower Interest Rate
One of the best reasons to refinance your home is to lower the interest rate on the current loan. Reducing your interest rate helps you save money, increase the rate at which you build equity, and decrease your monthly payments.
Refinance to Shorten the Loan’s Term
When interest rates are lower, some take the opportunity to shorten their overall loan term. This means that you opt to go from a 30-year mortgage to a 15-year mortgage if they can manage to get monthly payments around the current price they are paying.
Refinance to Tap Equity
Another reason homeowners choose to refinance is to access the equity they have gained. If there is a certain remodel or larger expense that they need money for, refinancing allows them to access those funds at typically a lower rate than a signature loan or even a car loan.
Overall, refinancing can be a helpful tool that allows homeowners to get lower interest rates, shortened loan terms, and access to their equity.
When Should You Refinance?
Refinancing isn’t something that should be done on a whim, but only when it will benefit the homeowner. If you find out that you can lower your interest rates, lower your monthly payments, shorten your loan term, or access home equity, then it’s ideal time to consider refinancing. When used carefully and correctly, refinancing is a valuable tool used to bring debt under control.
Here are a few questions to consider before refinancing:
How long do I plan to continue living in this house?
Will I save money by refinancing?
There are fees involved with refinancing. If you don’t have plans to stay in your current home for at least a few more years, refinancing might do more to hurt you than help you. However, If you can reduce debt, build equity, save money. and eliminate your mortgage payment, now’s the time to refinance.
As always, our team at Method Mortgage is happy to lead you to the smartest way home! Give us a call today!