Special article brought to you by Wasatch Peaks Credit Union
Q: Many of my friends have refinanced their mortgage recently, and they’re urging me to do the same thing. The thought of an extra few hundred dollars a month or to have extra cash for consolidation is very tempting. Should I refinance?
A: Refinancing a mortgage is essentially paying off the remaining balance on an existing home loan and then taking out another mortgage, usually at a lower interest rate. Here are some reasons many homeowners choose to refinance their mortgage:
TO TAKE ADVANTAGE OF LOWER INTEREST RATES
The first, and most obvious, reason homeowners refinance their mortgage is to take advantage of a lower interest rate. The drive behind this reason might be a change in finances, personal life, or simply the desire to save money.
Reducing your interest rate has several advantages. It can help you build more equity in your home sooner, decrease the size of your monthly payment, and of course, save you lots of money overall, which can help you better manage your finances. The current mortgage rates make this an excellent time to refinance into a lower interest rate.
TO SHORTEN THE LIFE OF YOUR LOAN
People sometimes choose to refinance their mortgage because they want to finish paying off their loan sooner. If you have a mortgage with a really high interest rate, refinancing can help you pay off your loan in half the time without changing your monthly payment much.
TO CONVERT BETWEEN ADJUSTABLE-RATE AND FIXED-RATE MORTGAGES
Homeowners often opt for an Adjustable Rate Mortgage (ARM) because of the lower rate it offers. Over time, though, adjustments can increase these rates until they top the going rate for fixed-rate mortgages. When this happens, switching to a fixed-rate mortgage can lower the homeowner’s interest rate and offer them stability instead of future rate increases.
WHAT IS A CASH-OUT REFINANCE?
Sometimes, homeowners choose to refinance to tap into their home’s equity and get their hands on a large sum of cash. To do this, they’ll need to refinance with a bigger loan so they can pocket the difference. Cash-out refinances are a great idea if you need some cash for a home renovation or to pay for your child’s college tuition. You can even use the cash to help consolidate your debt and cut down the number of payments to keep track of.
*With Wasatch Peaks, you can enjoy low rates, low fees, and take advantage of your home equity. To learn more about a mortgage refinance so you can do more of what you want to do, reach out to our Wasatch Peaks mortgage specialists! Get started by contacting our specialists at 801-627-8700 or by visiting your local Wasatch Peaks branch.