Mortgage interest rates have maintained near record lows, making 2016 a strong year for mortgage lending. But some homebuyers and homeowners remain skeptical about making a move. In a recent measure, refinancing which makes up a major percentage of mortgage activity, dropped, pushing mortgage applications lower by 0.7 percent.
What factors could be at play that contributed to this fall?
One factor pointed at is normalcy. Potential borrowers, homeowners and homebuyers are getting used to low rates. Second is an overall skepticism to buy or refinance because of poor knowledge about the processes’ pros and cons.
In this article, we will attempt to spell out what benefits refinancing can give you and why this could be a very feasible option indeed in this climate of low interest rates.
Lower Your Monthly Payment
If you take advantage of today’s low interest rates and have not gone 10 years deep into paying your first home loan, chances are you will be able to reduce your monthly payments if you refinance now. That is if you choose not to shorten your loan term or cash out on your equity. This is a good way to save a little extra to finance other familial or personal expenses.
Unlock Your Home Equity
Need money to cover your daughter’s university costs or fund some emergency home renovations? Get the money right out of your home’s equity through refinancing. You can get a line of credit based on your property’s value and the amount already paid for its mortgage.
Cashing out is one of the most common reasons why many homeowners choose to refinance.
Reduce Money Paid on Interest
Refinancing could be strategic in helping you save money on interest payments. For example, if you originally took out a 30-year fixed-rate mortgage and decide to switch to a 15-year fixed-rate loan, the shorter term allows you not only to pay off the debt faster but also to save money originally allotted for interest.
Consolidate Debts
Manage your finances better by consolidating debts through refinancing. If you have multiple lines of credit, you can compound them into your mortgage and have added benefits such as reduced repayments and interests.
Build Good Credit
If you had payment failures previously that damaged your credit score and reflected negatively in your trended data, you can use refinancing as a way to build good credit. It’s a smart use of refinancing.
Refinancing has abundant benefits but only if you make sure that the numbers add up. Get a good look at the calculations before you decide to call a lender to get refinanced. Factor in the costs old and new, and see if the break even time is worth the risk.
To get assisted with your refinancing journey, call us and get matched with a professional lender today!
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.
