To refinance a mortgage means to replace your current mortgage with another one that has better terms. Whether or not it’s a good idea to refinance your mortgage depends on many factors, and it isn’t the right decision for everyone. For instance, if you are moving soon or are almost done paying off your current mortgage, refinancing may not be the best choice. However, there could come a point in time when it makes sense to refinance your mortgage.
Here are three reasons to refinance your mortgage under the right circumstances:
- Obtain a Lower Interest Rate- If market interest rates have dropped, you can get a lower interest rate by refinancing. A lower interest rate can decrease your monthly payments and perhaps your overall interest payments too. It can also help you build equity in your home faster, since more of your money will go toward paying for the house itself rather than the interest.
- Shorten the Term- Many mortgages have a 30-year term, and in some cases, you can shorten that term to as little as 15 years without affecting your monthly payments significantly.
- Change to an Adjustable or Fixed-Rate Mortgage- If you started out with an adjustable-rate mortgage, your interest rate could become higher than that of a fixed-rate mortgage, so you may refinance your mortgage to switch. You may also want to switch from a fixed-rate mortgage to an adjustable one if interest rates are lower or you are planning to move in a few years.
It’s best to consult a professional before deciding to refinance your mortgage. If you have questions about refinancing options we have here at Harbor Mortgage Company, contact us today.