Mortgage rates remain at near record lows, and many homeowners are finding it cost effective to take advantage of today’s terms. Regardless of whether your mortgage has been in place for years or even months, it may be wise to consider refinancing.
A refinance loan essentially replaces your old mortgage with a new mortgage. There may be closing costs associated with a mortgage refinance, but those fees can often be rolled into the new loan to minimize out-of-pocket expenses.
Refinancing can be an excellent way to reduce monthly payments by lowering your interest rate, especially if your income has increased, your credit score has improved or the value of your home has stabilized. But it can help you meet other goals too.
- Become mortgage-free faster. If a lower rate reduces your monthly payment sufficiently, you might be able to opt for a shorter term loan. Paying off your mortgage in 10, 15, or 20 years can help you save thousands in interest.
- Pay for college tuition or other major expenses. Homeowners can refinance to pay for college tuition for themselves or their children.
- Provide extra money. A refinance loan with a cash-out option can provide extra funds to consolidate debt, make home repairs or pay off medical bills.
- Get better terms. When you get a new mortgage with a refi, you may be able to negotiate terms in the loan package such as prepayment penalties.