Refinancing is when homeowners trade their existing mortgage loan for a new mortgage loan, often with a lower rate or shorter loan term. A refinance taps into the home’s current equity for usable cash or could help you build even more equity in the long run.
While a home loan refinance may not make sense for everyone in many instances it can give you new opportunities you could be thankful for.
Here are five primary ways a home loan refinance could benefit you.
Five Home Loan Refinancing Benefits You Need to Know About
1. Potentially Lower Monthly Payments
One of the main attractions for refinancing a mortgage is to try and net a lower monthly payment. Even a difference of a half or a single percentage point could make refinancing your home loan a worthy endeavor.
Before refinancing, it may be a good idea to check the most current mortgage rates to see if they’re lower than your current rate. If you plan to move in the foreseeable future, be sure you will be able to recoup any refinancing costs paid at closing, which typically runs between two to five percent of the loan amount, depending on the lender. For example, if closing costs are around $3,000 and you save $300 through refinancing, your breakeven would be 10 months in that home.
2. Build Equity
Reducing your term allows you to build up equity in your property in less time. Plus, it could be a great idea for some homeowners who can afford to take on larger payments for bigger savings over the life of their loan.
3. Stabilize Your Loan Payments
If you currently have an adjustable-rate mortgage and wish for more predictable monthly loan payments, refinancing to a fixed-rate mortgage could give you the security you need to better budget for future plans.
4. Take Advantage of Your Credit Score
If your credit score has increased since you opened your mortgage loan, you could be in a better position to refinance your mortgage down to a lower interest rate. The option to choose a cash-out refinance could potentially help your credit score too since you could use the extra money to consolidate debt or build up your savings.
5. Pay Off Your Mortgage Sooner
There’s no better feeling than owning your home and having no more mortgage payments. Since your mortgage payment likely is your largest monthly bill, freeing up that cash every month could help with other everyday expenses, or you can build up your savings.
Refinancing to a mortgage with lower terms positions you to pay off your mortgage in less time. Again, you may have higher monthly payments if you go from a 30-year mortgage to a 15-year mortgage, but that also means you save money in interest in the long run.
The Bottom Line
Homeownership is still considered a wise investment by most Americans*, and regardless of how long you’ve owned your home, there is always a chance to make your investment do even more for you with a home loan refinance.
Contact WCM today to determine if now is the right time for you to refinance and to learn about our advanced digital processes designed to save you time, money and effort.
*Wyndham Capital Mortgage commissioned Atomik Research to run an online survey of 2,342 adults in the United States for their Mortgage 101 survey. The margin of error fell within +/- 2 percentage points with a confidence interval of 95 percent. The fieldwork took place between March 23rd and March 29th, 2021. Atomik Research is an independent creative market research agency.