Refinancing is a term used to describe the process of taking out a new mortgage to pay off and replace your original one. There are many financial reasons to do so – including reducing your interest rate, pulling cash out to pay off other bills, or reducing the term (length) of your mortgage.
While there are definite benefits to refinancing, you should consider a few different factors:
For instance, if you’re planning to move soon, refinancing may not be wise.
Make sure you really weigh all costs and benefits before making a final decision.
Here are 5 reasons why you might want to refinance your mortgage:
You Want to Get a Lower Interest Rate
If rates have dropped (or your credit score has improved) since you took out your mortgage, you may be able to get a lower interest rate if you refinance. Not only will this reduce the amount you pay in lifetime interest, it can also reduce your monthly payment.
You Want to Change Your Loan’s Term
You might have opted for a 30-year fixed-rate mortgage originally, but you want to pay if off in 15 years. Refinancing with a new term will allow you to do that. Conversely, if you are 10 years into your 30-year term, refinancing to another 30-year mortgage will re-set the clock, giving you more time to pay off your loan (and potentially decreasing your monthly payments).
You Are Trying to Consolidate Multiple Loan Payments
If you have a number of debts, you might want to refinance to consolidate multiple loan payments so you only have one payment to make each month – your mortgage. To do this, you will refinance and take cash out of the equity in your home, using it to pay off your other bills.
You Want to Convert from an Adjustable Rate to a Fixed-Rate
Although adjustable-rate mortgages start out with an attractive low-interest rate, as time goes on it adjusts with the market, which means it can go up. An adjustable rate mortgage is unpredictable; refinancing to a fixed-rate mortgage will ensure that your interest rate (and monthly payment amount) stays safe from future rate hikes.
You Want to Cash Out Home Equity
Mortgage interest rates are low – much lower than other financing options. If you’ve got a big expense coming up (college tuition, a home improvement project, or expensive repairs) and find yourself without the savings to cover it, a refinance can allow you to tap into the equity and pull the cash right out of your home.
TILA Mortgage is a local company that thoroughly understands the mortgage loan landscape. With vast experience and a stellar reputation, their expert mortgage banker/brokers can answer all of your questions about mortgage refinancing in Seattle. Give them a call today – they’re waiting and ready to help!