When to refinance your mortgage

Have you thought about refinancing your mortgage? Refinancing can provide many benefits, including potentially lowering your monthly payment and giving you access to the equity you've built in your home. But refinancing is not without costs, which should be weighed vs. what you expect to save. 
 
Here are some of the reasons you may want to consider refinancing your mortgage. 
 

  • Reducing your interest rate – One of the most popular reasons to refinance a mortgage in recent years is to reduce your interest rate. If your credit score has increased or if market rates have dropped since you originally took out your loan, you should look into your options. A small reduction in your interest rate can potentially save hundreds of dollars in monthly payments and thousands over the life of your mortgage. 

  • Eliminating private mortgage insurance (PMI) – Homeowners who did not provide the required down payment when they originally purchased their home pay some form of PMI. If your home has appreciated in value, or you have accumulated equity by paying off principle, you can refinance your mortgage and potentially eliminate this additional cost. 

  • Converting an ARM to a fixed rate – When interest rates are low, you may want to consider locking in your rate before they start to climb. If you currently have an adjustable-rate mortgage (ARM) you may want to refinance to a fixed-rate mortgage. ARMs are home loans where the interest rate (and the monthly payment) may fluctuate based on changes in market indexes. Refinancing your mortgage to a fixed rate will eliminate the risk of a higher mortgage rate and allow you to budget for future expenses. 

  • Converting a fixed rate to an ARM – Sometimes your long-term plans for staying in your home change. If you adopt a new timeframe (say 5 years), you may wish to refinance to an adjustable rate loan that offers a low introductory period that may expire by the time you move.  

  • Shortening the term of your loan – If you’re serious about building home equity in a hurry, you may want to refinance and decrease the term of your loan. Many mortgages are structured to be 30 years in length, but options are available for 20-year, 15-year and even 10-year terms.  A shorter loan term may bring higher monthly payments, but will also allow you to pay less interest and pay off the loan much sooner. 

  • Accessing the equity in your home (a cash-out refinance) – If you’ve owned your home for several years, you have potentially built some equity. Refinancing your mortgage will allow you to access that equity and keep your monthly payment in line with the existing amount. The freed capital can be applied to current bills or be used to make a large purchase such as a car, boat, or home remodel.

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Ready to take the next step? Connect with one of our Home Loan Consultants by calling 1-800-CALL-VLY or clicking the link to find an mortgage expert near you.