Why Refinance?

In nearly every case, your mortgage will be the largest debt you’ll ever have to manage. With that in mind, it’s a good idea to give your personal real estate finance portfolio an annual checkup. And what better time to do so than during spring cleaning? Much like a cleaned-out garage or freshly organized drawer, a quick examination of your mortgage options can give you clarity and peace of mind moving forward.

As you look into your portfolio, you might want to consider refinancing your mortgage. In some cases, such a move can net you substantial savings in the long run. Here are the four most common reasons homeowners choose to refinance.

1. Mortgage Rates Drop By far the most common reason homeowners decide to refinance their mortgage is to secure a lower interest rate, which determines the total cost that you, as a borrower, will pay. However, it’s worth noting that, at the time of writing, most analysts are predicting a steep rate hike in 2018, so if you’re considering refinancing, it might be a good idea to do it soon.
2. Lower Payments Lowering a mortgage payment can be achieved by lowering the mortgage rate, lengthening the loan term, combining two or more loans, or removing mortgage insurance during refinancing.
3. New Mortgage Program If you want to refinance an adjustable-rate mortgage (ARM) to a new fixed-rate mortgage (FRM), combine a first and second mortgage into a simpler plan, or pay off a balloon loan, refinancing may be the way to go.
4. Debt Consolidation If you have sufficient equity, paying off your consumer debt by combining all debts into one lower monthly mortgage payment can significantly reduce the short-term deficits in your budget. However, it’s important to keep in mind the total long-term cost you incur by adding it into a 30-year mortgage payment.

Whatever your reasons for refinancing, shop around to make sure you’re getting the best deal before signing anything. You don’t have to refinance with your current mortgage company, so do a thorough search and ensure that it really is your best option.