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Learn
Refinancing Guide
There are many reasons to refinance your mortgage. Here are a few of the most common:
Take advantage of lower interest rates: If interest rates have lowered since
the time of your original mortgage, refinancing can reduce the amount of your monthly
mortgage payments.
Obtain cash: Let’s say you need cash for a major purchase or to consolidate
debts, refinancing can provide it at lower interest rates.
Change the term of your loan: If you currently have a 30-year fixed rate
loan, you might consider refinancing to a 10-, 15-, or 20-year loan which will lower
the total amount of interest you will pay over the life of the loan and allow you
to pay off your loan sooner.
Switch mortgage types: It’s become popular to switch from an adjustable-rate
mortgage, with high or no limits on interest rate increases, to a fixed-rate mortgage
which provides the predictability of knowing exactly what the mortgage payment will
be for the life of the loan. The type of mortgage loan you select will depend on
how long you expect to continue living in your current home and the monthly payment
amount you can comfortably afford. If you don't plan to stay in your house for at
least five to seven years, it will be reasonable to consider an adjustable-rate
mortgage, balloon mortgage or two-step mortgage. An adjustable-rate mortgage traditionally
offers lower interest rates during the early years of the loan than fixed-rate loans.
A two-step mortgage will give you a lower interest rate than a 30-year mortgage
for the first five or seven years. A balloon mortgage offers lower interest rates
for a shorter financing term, usually five or seven years. You can start to consider
15- or 30-year fixed rate mortgages if you plan to stay in your home for more than
seven years.
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