There are many reasons why refinancing your home loan makes sense – opportunity to obtain a lower interest rate; chance to shorten the term of your mortgage; desire to convert from an adjustable rate mortgage to a fixed-rate mortgage or vice versa; opportunity to tap into your home’s equity in order to finance a large purchase; and desire to consolidate debt.
Consider the Benefits
Tax benefits – Take advantage of tax benefits that come from consolidating other debts into your home loan(s); include your auto loans and other installment debts into your mortgage loan payment so that the interest paid may be tax-deductible.
Convenience – Combining your first and second home loans (and possibly other loans) into one payment saves you time and effort. And sometimes, a new, single home loan can reduce your overall interest rate.
Lock in a fixed rate – If you currently have an Adjustable Rate Mortgage (ARM), it may make sense to switch to a fixed rate mortgage to protect yourself against future increase. This usually makes good sense if you plan to own your home for more than a couple of years.
Eliminate Private Mortgage Insurance (PMI) – Many homes have appreciated in value over the last couple of years so if you now are paying monthly mortgage insurance, a refinance could eliminate this cost and reduce your monthly payments.
Lower monthly payments – Reduce your existing interest rate or extend your loan term to reduce your monthly payment.
Tap into your existing home’s equity – This may make sense if you’re planning on remodeling your existing home, need cash for your college age child, or can now afford to treat yourself to a vacation.