You may be able to save money on your home payment by refinancing your mortgage. Refinancing at a lower interest rate has the potential to save you money each month, which can add up over time to large savings, depending upon your current interest rate, the interest rate at which you are able to refinance, and the amount you owe on your mortgage. Saving money is not the only reason to refinance, but it can be a motivating goal.
Refinancing Options for HomeownersThere are several appealing reasons to refinance your house. Refinancing is simply taking out a new mortgage loan to replace your existing mortgage at a lower interest rate. One option is to borrow just enough to pay off your existing mortgage at a lower interest rate so that your monthly mortgage payment is lower. You also can borrow more than your mortgage pay-off amount based upon the limits of your home’s equity, the amount your house is worth above the amount you owe, so that you can use the extra cash to pay off credit cards, make home repairs, have emergency funds, start a business, or use as a down payment for an additional real estate investment, or whatever other use you choose. Refinancing is a way to increase your financial flexibility. Reasons to refinance include:
- Lower your monthly payment. Potential saving a few hundred dollar per month for the length of the loan term can result in large accumulated savings to help pay off credit card debt, buy an additional real estate property, or whatever other purpose you choose.
- Shorten your loan term. You can refinance a 30-year mortgage into a 15-year mortgage or some other shorter term. This results in paying less interest over the life of your mortgage.
- Switch from an adjustable rate mortgage to a fixed rate. This is an appealing option when rates are low, allowing you to lock in a low mortgage rate and avoid the risk of major rate increases later.