Top 4 reasons to refinance your mortgage
Here are the top four reasons for re-doing your home loan, and mortgage refinancing advice about the best types of loans to achieve each goal.
Lower your monthly payment
You can lower your monthly expense by stretching out your mortgage repayment over a longer term and by lowering your interest rate. That means investigating 40-year mortgages, interest-only options, and adjustable-rate mortgages (ARMs). Each of these mortgages comes with trade-offs, so get additional refinance information about their pros and cons before proceeding.
Lower your interest rate
Refinancing to a loan with a lower mortgage rates can help you pay less interest. If you plan to keep your home for many years, look into 15- or 30-year mortgage refinancing; otherwise, you'll find the lowest mortgage rates come with ARMs and hybrid ARMs, which are fixed for 3-10 years before resetting.
Pay your mortgage off faster
Switching to a 15-year mortgage confers a couple of advantages. Mortgage rates on 15-year loans are about half a percent lower than rates on 30-year fixed-rate loans. You pay off your home loan in half the time, and pay much less interest. The trade-off is that your mortgage payment is higher; make sure you can afford it before committing to this loan.
Convert an ARM to a fixed-rate mortgage
If you plan to keep your home for a long time, taking a fixed loan with a higher rate than your current ARM may make sense in the long run. It keeps you safe from inflation, and makes budgeting easier. In this case, 15-year and 30-year fixed mortgages are the most appropriate.