Mortgage rates are at historic lows, so now is a great time to consider home refinancing.
There are many benefits of refinancing a home, including the fact that you can lower your monthly payments. But this isn’t the only reason why you should consider refinancing.
Keep reading to discover seven refinance benefits.
1. Pay Off Your Mortgage Sooner
In addition to lowering your monthly payments, one of the biggest benefits of refinancing your home is that you can pay your mortgage off sooner.
The standard loan term for buying a home is 30 years. The vast majority of your payment goes towards the interest, which is why it can take so long to pay the loan off.
But if you have the opportunity to refinance, you may be able to cut the time it takes to pay your loan off in half.
By getting rid of one payment every month, this allows you to do what you want with your money. It also means you’ll be a homeowner sooner rather than later, and that can be a really good feeling.
2. Lower Interest Costs Over the Life of the Loan
Every loan has an interest rate, it’s how financial institutions make money to continue lending out money. It also has an impact on the amount of money you pay each month for your mortgage payment. The rate you pay is based on several factors, including the current federal rate and your credit score.
Interest rates fluctuate and change in response to market conditions, and sometimes they will be high, while other times they are low.
If you happen to have a lower credit score, the financial institution will view you as a risk. While they won’t deny you a loan, they will increase the interest rate to ensure that they get their money out of you.
Over time, as interest rates go down and/or your credit rate improves, you should use this to your advantage. When you refinance, you can lower your payment and pay less in interest costs over the life of the loan. This can save you a lot of money.
3. Fixed Rates
There are a variety of different loans that you can get for your home, and one of them is called an adjustable-rate mortgage.
Having this type of loan means that the interest rate on your loan will vary—and it could go up or it could go down.
As the interest rate changes, how much you have to pay every month will also change. If the interest rate is high, your payment will be high.
One of the refinance benefits you can get is having a fixed-rate loan. This means that your interest rate won’t change the entire time you have your loan.
This can be beneficial in numerous ways, including the fact that you will have a predictable monthly payment, which can help your budget, and your payment won’t increase because the interest rate won’t change.
4. The Ability to Get Cash
Should you decide that you want to refinance and get a loan for more than what you owe on your current loan, you can get cashback. This is known as cash-out refinancing, and it gives you cash that can be used for anything you want.
If you have some home repairs you want to take care of, you’ll have the cash to do that.
Perhaps you want to invest.
No matter what you have planned, having some extra cash from a refinance can be beneficial and help make your dreams come true.
5. Consolidate Your Debt
Should you decide to refinance and get cashback, you can even use the money to pay off your other debts. When you have fewer payments to worry about every month, this can relieve a lot of stress.
Consolidating your debt can also make it easier to pay off your loans.
This benefits you in a variety of different ways, including improving your credit score and ensuring that you have money for emergencies if they arise or to go out and have some fun.
6. Build Equity Faster
Investing in a home not only gives you a place to raise your family, but it also creates equity.
Your property value will likely increase over time, and you can build that equity faster by refinancing and lowering your monthly payments.
Again, having extra cash on hand gives you the ability to make improvements to your home, which can increase the value even further.
It may take a lot to buy a home, but when you make smart decisions, such as refinancing, this can pay off if you ever decide to sell.
7. Improve Your Credit Score
Your credit score is what financial institutions use to decide if you are worthy of lending money to and what your interest rate will be.
Whether you are buying a car, furniture, or trying to get a new credit card, the lender will look at your credit score.
To ensure that you are always getting the best interest rate, having a high score is in your best interest. You can achieve that by refinancing your home loan and paying it off sooner.
Once you have a really good credit score, you might have financial institutions fighting over who gets to lend you money.
Benefits of Refinancing a Home
As with anything in life, there are pros and cons of refinancing. One of the cons is that to refinance, you have to go through the lending process once again, and this can take time and impact on your credit score.
However, the benefits of refinancing a home can outweigh the small inconveniences you might have to go through.
With everything that is going on in the markets and around the world, there is no time like the present to look for a low-interest rate and reduce your monthly payment.
If you have any questions or are curious to see how much you can save, contact Robus Mortgage today. We have a lot of experience in the mortgage industry, and we’ll do what we can to ensure you get the best refinance loan possible.