If you’ve owned your own home for some time, chances are good that you’ve at least thought about the possibility of refinancing your mortgage. Thousands of American homeowners, with disparate motivations and concerns, refinance their mortgages each year. The process is well-established and probably not as hard as you imagine.
Then again, you shouldn’t refinance just to refinance. As with any big decision, it’s important to think through your situation and arrive at a convincing case for why it makes sense for you and your family. Here are some common reasons why people choose to refinance — and why you might want to do so now.
1. You May Be Able to Reduce Your Interest Rate
When you’re mulling over the possibility of refinancing your mortgage, one of your biggest considerations should revolve around the interest rate on your current mortgage. If it’s substantially higher than the interest rate for which you qualify on your refinancing loan, it might make sense to refinance. That’s because a lower interest rate translates to lower monthly payments, all other things being equal. A lower interest rate also helps you build equity in your house faster than a higher rate, since more of each payment goes toward your loan’s principal.
2. You May Qualify for Lower Mortgage Insurance
The Federal Housing Administration recently lowered the cost of mortgage insurance on FHA loans, potentially reducing borrowing costs (and monthly payments) for folks with relatively little equity in their homes. If you have an FHA loan and are still working on building equity in your home, you’ll want to pay special attention to your mortgage insurance rates.
3. You Could Help Your Credit Score and Profile
For many people, the decision to refinance is all about making more room in a tight monthly budget. If your refinanced loan results in a lower monthly payment, you might find it easier to make said payments on a regular basis. Since missing a payment isn’t good for your credit profile, this is a potentially powerful incentive with significant long-term benefits.
4. You Could Reduce Your Financial Stress Levels
Another key reason to refinance your mortgage and get helpdesk guide to less stress, specifically financial stress. If your refinanced loan results in a lower monthly payment*, you could have more room in your budget for other obligations, such as childcare, groceries, clothing and car payments. You might even be able to afford a treat for yourself once in a while! It’s hard to put a price on that sort of financial peace of mind. And with less to worry about in the money department, you could find that your interactions with colleagues, friends and family members are more pleasant and fulfilling.
These aren’t the only good reasons to refinance your mortgage. Since your situation is apt to be a bit different than your neighbors’, you could find yourself with very different — but no less compelling — motivations for pulling the trigger on your refinancing. To learn more, get in touch with an experienced professional who can provide actionable advice about your specific situation.
* By refinancing your existing loan, your total finance charges may be higher over the life of the loan.