Reasons to Refinance

There are many great reasons to refinance.

With lower cost, adjustable rate, and 0-down options, traditional loan programs like 30-year or 15-year fixed rate mortgages don’t always allow you to meet your financial goals. Today, even reducing your mortgage interest rate a little can save you big over the life of your home loan.

Here are five reasons to consider refinancing:

1. Lower Your Monthly Payment
If you plan to live in your home for a few years, it may make sense to pay a point or two to decrease your interest rate and overall payment.

Over the long run, you will have paid for the cost of the mortgage refinance with the monthly savings. On the other hand, if you plan on moving in the near future, you may not be in your home long enough to recover the refinancing costs. Calculating the break-even point before you decide to refinance can help determine whether it makes sense.

2. Switch From an Adjustable Rate to a Fixed Rate Mortgage
Adjustable rate mortgages (ARMs) can provide lower initial monthly payments for those who are willing to risk upward market adjustments. They’re also ideal if you don’t plan to own your property for more than a few years. However, if you have made your house a permanent home, you may want to swap your adjustable rate for a 15-, 20- or 30-year fixed rate mortgage. Your interest may be higher than with an ARM, but you have the confidence of knowing what your payment will be every month for the rest of your loan term.

3. Escape Balloon Payment Programs
Like adjustable rate mortgage programs, balloon programs are great when you want lower rates and lower initial monthly payments. However, if you still own the property at the end of the fixed rate term (usually 5 or 7 years), the entire balance of your mortgage is due to the lender. If you are in a balloon program, you can easily switch over into a new adjustable rate mortgage or fixed rate mortgage.

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