Before mortgage interest rates begin to rise, homeowners should
consider the advantages of refinancing now. Although we’re witnessing record low rates, these rates will not last forever. Unfortunately, many
homeowners will delay refinancing and miss out on the savings. There are many reasons to refinance. Here are the top three reasons to refinance while rates are low.
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Reduce Your Monthly Mortgage Payment
Interest rates greatly effect mortgage payments. Individuals with poor
credit can get approved for home loans. However, the lender will charge
higher fees or interest. If you receive a high interest rate, you may
pay a couple of hundred dollars more than a good credit applicant who
applied for the same mortgage amount.
If you purchased your existing home with poor credit, refinancing for a
lower rate may decrease your monthly payments, especially if your
credit has improved. Obtaining a home loan is a great way to boost your
credit rating. In fact, many homeowners notice an increase in their credit
score after establishing a good payment history with their mortgage
lender. Thus, if you received a bad credit mortgage, make an effort to
better your credit, and then refinance for a low rate.
Get a Fixed Rate Mortgage Loan
Furthermore, many homeowners choose to refinance their existing
mortgage to take advantage of a low fixed rate. When interest rates were
higher, many home buyers opted for adjustable rate mortgages because they
carried lower rates. Although homeowners with an adjustable rate mortgage
also benefit from decreases in interest rates, these low rates are not
promised.
Every so often, mortgage rates rise and fall. If rates begin to climb,
so do the rates for an adjustable mortgage. Hence, mortgage payments
will increase. To avoid increased payments, refinance and secure a low
fixed rate that will remain the same throughout the duration of the loan.
Take Advantage of Cash-Out Refinancing
Cash-out refinancing is a very attractive feature to refinancing your
current home loan. With this option, you can refinance for a better
rate, and borrow from your home’s equity. At closing, you will be given a
lump sum of cash. Funds may be used to consolidate debts, remodel your
home, take a nice vacation, or pay for a child’s education expense.
