When to Refinance
Does refinancing make sense for you?
Find out. Here are the most common considerations for refinancing your home.
Get a better interest rate.
Interest rates on home loans can go up or down depending on market forces and rate adjustments. If your current loan features a fixed interest rate, nothing changes. The only way you can benefit from a lower interest rate is to refinance your current loan or sell your home and buy a new one.
Generally, if current interest rates drop two points below the rate on your fixed-rate loan, and you plan to stay in your home awhile, you may be ready to refinance.
Get out of an ARM.
Some homeowners leverage the lower initial interest rate of an adjustable-rate mortgage (ARM) to get into a home that might be more difficult to afford at a fixed rate. When the ARM starts to adjust upward, so does the monthly payment. Generally, when the adjustable interest rate reaches at least two points above published interest rates, it might be a good time to consider refinancing to a fixed-rate loan. If you qualify, doing so may lower your monthly payment and offer some peace of mind because you’ll know that the rate won’t change. Contact your loan officer for more information.
Pay off your home faster.
When you refinance to a lower interest rate, you’re freeing up cash that can be applied to the principal on your mortgage payment, which helps you pay off your home sooner.
Bills pile up. Credit cards can bulge. Life happens. Adding some cash to the refinance loan amount (a cash-out refinance) can help you pay off some of those bills while also beefing up the tax-deductible mortgage interest payments. Be sure to check with a tax professional.