Why You Should Refinance Your Mortgage Now: 5 Good Reasons
(ARA)- In this troublesome economy, there are five particular situations where it can make sense to refinance. Just remember to always know what your financial goals are, so that you can make the best decision for you and your family.
The first opportunity is refinancing from an Adjustable Rate Mortgage (ARM) to a fixed-rate mortgage. Many ARMs are now adjusting to extremely high rates, and helping to refuel the default crisis. Now is the perfect time to consider a fixed-rate mortgage if you have an ARM that is set to increase dramatically. Additionally, because rates are at historic lows, you may actually be able to get a better fixed rate then what you have on your ARM loan currently, which could mean a lower payment on top of the security of knowing your locked into a fixed rate.
A second opportunity could be to shorten the term of your mortgage while keeping the same or increased monthly payments you have now. Depending on the loan you qualify for, it might be possible to reduce a 30 year mortgage loan down to a 15 or 20 year loan with increased payments, but possibly at a lower interest rate. Think of all the interest you will be saving, not to mention not having to make that mortgage payment for all those extra years!
A third advantageous time to refinance is when you have the chance to lower your monthly mortgage payment. In fact, a drop of 1½ percent in interest could lower your monthly payment by hundreds of dollars each month and thousands of dollars over the life of your mortgage loan.
A fourth strategy is to use your home's equity to refinance your mortgage. Think of the equity in your home as a savings account. It can be accessed via a home equity loan or a cash-out refinance to finance a home renovation, college education, or pay down on high-interest credit card debt. (Remember, though, that there is a huge difference between credit card debt and your mortgage: Interest paid on a mortgage is tax-deductible.) However, it is a must to consult your tax advisor regarding this move.
The last reason is closing costs. Often, homeowners realize all the advantages to refinancing their homes, but still avoid it due to the closing costs involved. However, what most don't know is that you can often refinance with no closing costs due to the interest rates being so low right now, but note that no closing costs on the front end could mean you are not taking full advantage of the lowest rates available and higher fees are possible.
There are lots of great potential reasons to refinance your mortgage. However, these depend on a variety of factors: how long you'll stay at your current home, your financial goals, interest rates in general, your personal financial situation and more.
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