Our Maryland mortgage lender team are often asked what the benefits are of refinancing your mortgage. While the benefits vary from one borrower to the next, there are key things that everyone can benefit from.
Mortgage Rates
A lot of borrowers refinance their mortgage loans in order to get a better, lower interest rate. Whether you have a fixed-rate or adjustable-rate mortgage, you can lock in a new lower rate should the market rates drop below what you are currently paying. There are also instances where a borrower’s credit rating has improved enough for them to get a lower rate.
As a Maryland mortgage lender, we can ensure you are getting the best rate for your financial situation. Contact us to find out what you qualify for!
Monthly Payments
Another big benefit of refinancing your mortgage loan is that you can lower your monthly repayments. This is especially true if you keep the same mortgage term, or extend it, for the refinanced mortgage. Paying less each month leaves you with more money to put towards other things or into savings.
Costs Are More Predictable
For those who have an adjustable-rate mortgage, refinancing your loan gives you the chance to switch to a fixed-rate loan that offers more predictable monthly payments. This is a good option for those who need to be more careful with their monthly budget.
Shorter Term
We’ve mentioned extending your term with a refinance, but you could also shorter the term time in order to pay your mortgage off quicker. This will save you loads on interest over your loans’ term time. Just keep in mind that your monthly mortgage repayments will rise. This is a good option if you’ve come into a large sum of cash and can afford the rise in payments.
Borrow Against Equity
For those who want to tap into the equity of their home, you can choose a cash-out to refinance. This will give you access to funds for whatever you need it for. You get a lump sum that gets added to the principle of the loan. This is a cost-effective way to borrow funds because the rates are usually lower and it is also tax-deductible.
Cash-Out Refinancing
There are a number of reasons that people choose to refinance their mortgages:
Debt Consolidation
If you have high-interest rate debts, you can use a refinance to pay these off, which works to lower your monthly repayments. The interest rates on a refinanced mortgage are usually a lot lower than what you have on your credit cards and unsecured debts. This will save you a lot of money on interest payments.
HELOC
Another reason borrowers choose to refinance is to combine their second mortgage and primary mortgage through a HELOC, or home equity line of credit. It’s similar to a cash-out refinance but won’t reduce the equity in your home because you are the funds to pay off your secondary loan. It also gives you the convenience of making one monthly repayment rather than two.
Getting Rid of Mortgage Insurance
For those who are paying mortgage insurance, once you have paid off 20% of the equity, you can cancel it and lower your monthly repayments.
Removing Someone From the Mortgage
If two people are on the mortgage and something happens where they are no longer financially responsible for the loan, such as through divorce, death, or no longer need a co-signer, you can use a refinance to remove them from the mortgage loan.
As you can see, there are many reasons and benefits for refinancing your mortgage. If you want to see if a refinance is right for you, give our Maryland mortgage lender team a call today!