With low interest rates, you may be thinking about refinancing your home. By doing so, you could lower your monthly mortgage payments and / or save interest over the life of the loan. However, according to refinancing specialist, 1st Eagle Mortgages, it is not only about the interest rate. You must also take into account the costs and risks. This is an in-depth look at the reasons to refinance, and the pros and cons to consider.
Refinancing for another 30-year term after you have made payments for years and accumulated value will lower your loan principal, which in turn will lower your monthly payments, and make room in your budget for other financial goals.
If interest rates drop after your loan closes, you might consider refinancing to take advantage of the lower rate. You could save tens of thousands of dollars, depending on how long you’ve been on your loan and the difference between your current rate and the refinance rate. Still, there are other factors to consider. To learn all the details and decide what is best for you, talk to your lender.
If your original loan is an adjustable rate mortgage (ARM) and your initial fixed term is about to expire, you may want to refinance to a fixed rate mortgage. Protect yourself from rising interest rates in the future by setting a rate. And it’s easier to plan and budget when you have the same principal and interest payments each month. Remember, you still have the option to refinance for a term of less than 30 years (typically 10, 15, or 20 years).
If you can afford to increase your monthly payments, one option is to shorten the term of your loan. By paying more for a shorter period of time, you could save thousands of dollars in interest over the life of the loan and be homeowner, mortgage-free, sooner.
As an alternative to a home equity loan, you can refinance and cash out a portion of your home equity. This allows you to have access to a large part of the money without selling your home. You may need the money to start a business or to pay for a child’s college education. Keep in mind, however, that the money you withdraw will cost you more in interest over the term of your new loan, but not necessarily more than other financing options would.
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