Refinancing is when you replace your current mortgage with a new one. The most common reason is to lower your interest rate–but there’s several other reasons why refinancing your Redding home could be a good move.
1. Acquire Lower Rate
First, you can refinance your home loan to acquire a lower interest rate. This could be accomplished in two ways–your credit score has improved since your mortgage began, or the current mortgage rate in Redding is simply lower now than when you first agreed to take out your mortgage.
If this is your strategy for refinancing, we suggest calculating the breakeven point. During a free consultation you could determine how much you could save per month. Then, calculate the number of months it would take for your stay in your home and offset the refinancing fee.
Example: 30 months to breakeven = $3,000 in closing costs / $100 a month in savings
If you plan to keep the house for more than the break-even time, refinancing is a no-brainer.
2. Change Your Loan Type
At first, you may not have qualified for the type of loan you wanted. Instead of having to keep a Federal Housing Administration (FHA) loan, you might want to look into opting for a conventional loan that is a better fit for you through home refinancing.
3. Reduce Loan Term
The quicker you can pay off your mortgage, the more you’ll save on interest during the lifetime of your loan. If you think you can take on the challenge of turning up the heat on your mortgage, refinancing from a 30-year fixed rate mortgage to a 20-year or 15-year is worth considering.
Typically, reducing the length of your mortgage can be an appealing option for homeowners seeking to pay off their house before retirement. The sooner you can pay it off, the sooner you’ll be living mortgage free.
4. Switch to a Fixed Rate Mortgage
There is no need to arm wrestle with your adjustable-rate mortgage (ARM) any longer. If you are looking for more security and stability, perhaps home refinancing to a fixed mortgage is more suitable. Pulling this off is all about timing–you’ll want to keep your eye out for when rates are low and then lock-in on the good numbers.
5. To Get Cash & Invest
Home refinancing could also look like this for you: taking cash out of your home. Want to reinvest some money into a home remodel? Or just need to pay unexpected bills? Refinancing is a way to unlock some your built-up capital and use the money that belongs to you.
Another common motivation behind this reason is to help your children pay for college tuition. If you can’t get that low of an interest rate elsewhere, taking cash out is a wise decision.
6. Consolidate Debt
A certain level of financial responsibility is required for this one. Mortgages are recognized as having some of the lowest interest rates around, so credit card debt and other debt can be consolidated and paid off at a slower rate.
Every person is on their own financial journey. If you want to talk to someone about which of these refinancing reasons would be most advantageous in your situation, we’re always happy to help.
The views, articles, postings and other information listed on this website are personal and do not necessarily represent the opinion or the position of American Pacific Mortgage Corporation.
* For loan examples and more information visit our disclosure page at https://www.uslendingcompany.com/disclosures/