Top 5 Reasons To Refinance Your Mortgage

By Martin W Hayes
The most common reason that people refinance their mortgage is to save money on their monthly payments, however there are a variety of other reasons that refinancing can be beneficial.

1. Refinancing to Lower Your Monthly Payment on Your Existing Mortgage. You can refinance your existing loan at a lower interest rate which can greatly reduce your monthly loan payments. You can find some excellent interest rates in today’s market - sometimes considerably lower than what you are paying on your current mortgage. Refinancing your mortgage when rates are down could save you hundreds of dollars every month and thousands over the life of your loan.

2. Refinancing to Consolidate Debts.
You may choose to refinance in order to consolidate debts and replace high-interest loans with one larger, low rate loan. It is often beneficial to you as the borrower to consolidate high interest loans such as credit cards, auto loans, and even student loans. Consolidating all of your debt into one lower monthly payment can help ease your financial burden and provide you with extra cash in your pocket each month.

3. Refinancing to Reduce the Term of the Loan.
Reducing the term of your loan can help you save money over the life of the loan. For example, refinancing from a 30-year mortgage to a 15-year mortgage might result in higher monthly payments; however these higher payments are offset by the total interest savings over the life of the loan. You will also be able to build up your equity in the home faster. Visit our free loan calculators to see how reducing the term of the loan can result in huge interest savings.

4. Refinancing to Switch From Adjustable to Fixed Rates.
You can also refinance in order to switch from an adjustable (variable) rate mortgage to a fixed rate mortgage. The main reason behind this type of refinance is to obtain the stability and the security of a fixed loan. While variable rates often provide low initial monthly payments, the payments with these loans can often increase dramatically over the life of the loan. A major benefit of refinancing into a fixed rate is the ability to lock in a low interest rate for the duration of your loan.

5. Refinancing to Switch from One Lender to Another.
Rates and terms are not the only reason to refinance your mortgage. Switching to a different lender may prove to be beneficial for many reasons: better customer support services, more flexible loan repayment terms or other options that may be more suitable for your needs. Refinancing your loan can allow you to drop your current lender and switch to a new one with a better overall loan package.

You should carefully weight the savings you can earn by refinancing against the possible costs or penalties. Any homeowner can refinance their mortgage; the key is to weight your options to determine if refinancing is the best option for your situation.

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