The Pros & Cons of Refinancing

Refinancing may be a bit of a hassle but it can lead to significant financial savings. Benefits may include; taking advantage of lower rates, having a lower monthly mortgage payment, decreasing the duration of the loan term, cashing in on equity and converting to a different loan type. Let's explore the benefits of refinancing.

Lower Rates

One of the top reasons to refinance is to take advantage of lower rates. A lower rate will lower your monthly mortgage payment and increase the rate at which equity is built. A lower interest rate of just a point or two may result in substantial savings over the years. Refinancing may also be an opportunity to reduce the loan's term enabling you to pay it off sooner.

Cash In On Equity

Refinancing allows homeowners to tap into their homes equity for big expenses such as vacations, college tuition or home improvement projects. Cash out refinance enables the homeowner to receive a lump sum.

Convert To A Different Loan Type

For example, ome buyers with ARM home loans from loanDepot which may have fluctuated to a higher rate may want to convert to a fixed-rate loan in order to take advantage of a lower rate and the stability of a constant rate. Refinancing allows homeowners to switch to the loan type that is more favorable depending on market conditions.

Consider Refinancing Costs

Refinancing generally comes with a number of refinancing costs and fees. Calculate if the savings will outweigh the costs before biting the bullet.