5 REASONS WHY YOU SHOULD REFINANCE YOUR MORTGAGE

There are so many reasons why most people refinance their loans. Here are the Top-5 reasons why they do and why you should too:

1. Lower the monthly payment. You can lower your monthly expense by stretching out your mortgage repayment over a longer term and / or by dropping your interest rate. If that’s your goal, investigate 40-year mortgages, interest-only payments and adjustable-rate mortgages (ARMs). Each of these mortgages comes with trade-offs, so get additional refinance information about their pros and cons before proceeding.

2. Lower the interest rate. Refinancing to a home loan with a lower mortgage rate can reduce your monthly payment and the amount of interest you pay. If you plan to keep your home for many years, consider 15- or 30-year fixed home loans; otherwise, you’ll find that ARMs and hybrid ARMs, which are fixed for 3-10 years before they begin adjusting, carry the lowest mortgage rates.

3. Pay the mortgage off faster. Switching to a 15-year mortgage gets you a couple of advantages. Mortgage rates on 15-year loans are about half a percent lower than rates on 30-year fixed-rate loans. Your home equity goes up and your interest expense goes down. The trade-off is that your mortgage payment is higher; make sure you can afford it before committing to this loan.

4. Convert an ARM to a fixed-rate mortgage. If you plan to keep your home for a long time, taking a fixed loan with a higher rate than your current ARM may make sense in the long run. It keeps you safe from inflation and makes budgeting easier. In this case, 15-year and 30-year fixed mortgages are the most appropriate.

5. Trade home equity for cash. If you want cash to renovate your home, pay college tuition, consolidate debt, or for any other reason, cash-out refinances and home equity loans were made for you. Use the home equity loan if you like the mortgage you have, and the cash-out refi if you don’t.

you might be able to improve the terms of your mortgage by refinancing, and it isn’t that hard to do. If  you’re considering taking advantage of lower rates, swapping a fixed-rate mortgage for your adjustable loan (or vice versa) or cashing out some of your home equity, these five steps can help you navigate the refinance process.

Determine if you should refinance. Refinancing is one of those things that shouldn’t necessarily do just because you can. Your decision depends on your objective, your timeframe, and your profile. First, you need to know what you’re dealing with – your current rate, program and payoff. Then use a refinance calculator to see how your loan stacks up against refinance mortgages

Find a lender. There are several ways to find mortgage lenders. The old-school way is to get out the yellow pages and start dialing. A more efficient method is to get quotes from lenders online, then interview two or three of the most competitive. You’ll want to be comfortable with the person who helps you choose and apply for your mortgage refinance.

Choose a refinance program. Chances are good that more than one refinance program will work for you.a The 15-year fixed loans accelerate your payoff and come with lower rates but higher payments than 30-year loans. 30-year fixed rate mortgages are safe and make budgeting the easiest. And hybrid ARMs come with the lowest rates, which arae fixed for 3, 5, 7 or 10 years. In addition, homeowners with little equity may want to explore government refinance mortgages and streamline refinance programs.

Apply for your refinance. You’ll have to complete an application with a mortgage loan officer or broker and probably document your income and assets. Unless your refinance is a streamline program, your home will be appraised. This is where it pays to have an experienced professional working with you to get your refinance approved – good ones head off most of the eleventh-hour surprises and help you close your loan smoothly.

Lock in your refinance rate. Mortgage rates move with financial markets and can change several times a day. If you want to lock in a target rate, you may have to move quickly.

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