The Benefits Of Mortgage Refinancing

Mortgage refinancing allows a homeowner to trade off the old mortgage with a new one. Typically, you can get a new loan with better terms depending on your home equity. Continue reading to discover the benefits of mortgage refinancing. 

Lower Mortgage Payments

The primary reason for refinancing a mortgage is to get better payment terms. Typically, a mortgage comes with the obligation of monthly payments. The payment goes towards the principal amount and the interest on the loan. Mortgage refinancing can allow you to get lower interest rates. In this case, you can refinance your loan when the average mortgage interest rate falls below that of the existing loan. This way, you will get a new loan at lower interest rates and end up saving a substantial amount. 

In addition, you can reduce the monthly payments by extending the loan term. For instance, you can replace a 15-year mortgage with a 30-year loan. The lower monthly payments will allow you to free up cash for other financial obligations. 

Switch to a Fixed Rate Mortgage

Homeowners choose between an adjustable-rate mortgage (ARM) and a fixed-rate mortgage (FRM). The interest rate for an ARM changes over time, while that of an FRM remains constant. Mortgage refinancing can help you shift from an ARM to an FRM home loan. There are several advantages of having a fixed-rate mortgage. Primarily, the switch protects you from rising interest rates in the future and the effects of inflation. Also, it is easier to plan and budget your finances when you know the mortgage interest rates are constant. 

Reduced Loan Term 

Each mortgage has a loan repayment duration. It makes sense to get a mortgage with a term that enhances payment flexibility. However, your financial position may improve, giving you the ability to make higher payments. In such a case, it would be recommendable to refinance a long-term mortgage with a short-term loan. Although you will pay higher monthly payments, it will be for a limited time. This way, you will pay off your home sooner and save a lot in loan interest. 

Tap Into Your Home Equity

A cash-out refinance lets you access home equity without selling your house. The cash-out payment amount depends on the lender's terms and house value. Notably, you can use the amount you get from the cash-out refinance to meet other financial obligations. Thus, talk to a lender about a cash-out refinance if your house has gained equity since you took the mortgage.  

Mortgage refinancing can help you save money, enhance payment flexibility, and tap into home equity. Engage a financial lender, such as Choice Mortgage, about mortgage refinancing options and explore the full benefits.

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