Top 4 Reasons to Refinance Your Home Mortgage in 2016
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Top 4 Reasons to Refinance Your Mortgage for 2016
There are lots of reasons you might want to refinance, but most people do so because they fit into one of the four categories below.
Let’s explore some of top reasons you would want to refinance your home for the new year …
Reason 1: Refinance to reduce your monthly payments.
The primary reason for refinancing is to lower your monthly payment, which subsequently will increase your cash flow. By refinancing, you can free up some extra cash to incorporate into your monthly budget by cutting down the amount of your payments. There are multiple ways to do this, with the most popular being refinancing for a longer time frame or refinancing at a lower interest rate using an adjustable-rate mortgage.
These two options tie into the duration you plan on staying in the home. If you are planning on being there for a longer term than your original financing plans, you can refinance to a longer-term fixed loan and cut those monthly bills down. If you are planning on staying in the home a shorter time, you could adjust to an ARM and also get those monthly payments down.
Reason 2: Refinance to shorten your term.
A great reason for refinancing is to lower your term. When clients take on 20+ year terms, the paid interest greatly increases since interest on home loans are front-loaded. What this means is that the majority of your payment the first 15 years is primarily going to interest thus costing homeowners tens of thousands of dollars over the life of the loan. In a lot of cases, after borrowers see what shortening terms of their loan can do for them in comparison to slight payment increases, the savings normally shocks them. Refinancing can help you get out of a mortgage product you don’t like or that’s costing you too much – going from an ARM to a fixed rate mortgage, for example.
Reason 3: Refinance to get a fixed rate.
Another common reason for a refinance is for clients to get off of the adjustable-rate roller coaster. Many clients decide to take on adjustable rates when they do their home loans for various reasons, i.e. plan on moving soon, plan on switching terms or programs in the near future, etc. The simple fact is that plans change as do interest rates. In this day and age, we encourage our clients to get fixed-rate mortgages as the rates are still at historic lows and the little bit of savings now by getting an ARM will not be worth it in the long run as rates will raise. When they do, your ARM will rise too until it reaches its maximum cap, which can reach high into the double digits.
Reason 4: Refinance to tap into built-up equity in your home.
If you are looking to pay off those high-interest credit cards or other high-interest debt, the best way is to tap into your home’s equity. Clients can achieve huge monthly savings by doing this as it allows them to virtually pay off all of their other debt (if the equity is there) and gets them down to one payment a month. In a lot of cases, folks can pay everything off, shorten term and still save money monthly, thus allowing them to be debt free a lot sooner then they ever could have imagined. On VA loans we can refinance as much as 100% loan to value, so this is an awesome opportunity to get back on track.
When considering refinancing your home, keep in mind your overall goals. Future financial goals, duration of the time you’ll spend in the house, and future family plans can all affect refinancing principles. It’s also important to evaluate your current financial status. Is your credit score high enough to receive a loan? Does it make sense to be paying more now rather than later? These questions and other personal aspects have to be considered when making your decision. Being smart about financing is crucial. Reach out to our Loan Specialists to consult and evaluate if refinancing is a good move for you, what the current interest rates are, and what options are available.
Begin the VA Home Loan or Refinance Process
Do you have more questions about the VA Home Loan Process, or are you ready to start the process?
Talk with a VALoanSpot Loan Specialist today at 800.537.2050, or fill out our Get A Quote form and a specialist will contact you shortly.