5 reasons to refinance your mortgage

Imagine you suddenly have access to extra cash, while also lowering your monthly payments on your mortgage. Well, that’s exactly what refinancing can do.

The largest asset you own is your house. And your mortgage payment is the largest expense you have. But by refinancing, you can use your largest asset to reduce your monthly payments and even put extra cash in your pocket.

You see, when you refinance your mortgage, you can take advantage of the equity in your home to make this dream a reality.

There are basically five reasons to refinance right now:

1. Lower your rate
2. Shorten the length of your mortgage
3. Replace your adjustable rate for a fixed rate
4. Pay off your high-interest debt and reduce your monthly bills
5. Get access to extra cash to do whatever you want

As you know, mortgage interest rates are constantly fluctuating. They’re probably not the same when you originally purchased your home.

When rates fall below the rate you’re currently paying, you can exchange a higher interest rate for a lower one, which will lower your monthly payment.

Another way to save tens of thousands of dollars – if not hundreds of thousands of dollars – is to shorten the length of your mortgage.

For example, if you have a traditional 30-year-mortgage, you can refinance and switch to a shorter term of either 10, 15 or 20 years. If the refinance rate is lower, and you keep the same monthly payment, you will build up equity in your home more quickly because more of your payment will be going towards principal.

Adjustable rate mortgages do just that – they adjust. As rates fall, the mortgage rate falls and homeowners look like financial wizards.

But, as rates increase, so do mortgage rates. And that usually happens in a tight economy as other prices increase making it difficult for homeowners to make ends meet.

In such cases, it may be more beneficial to refinance at a fixed rate knowing that your monthly payment will remain the same regardless of what’s happening in the economy.

This is one of the most attractive reasons to refinance. You simply tap into the equity you’ve built in your home and use that money to pay off your high-interest credit card bills. In this refinancing scenario, the money used to pay off your credit card bills is added to your principal balance. Your total monthly bill payments are quite a bit less because you’ve eliminated the high interest credit card bills. And if you refinance at a lower rate, you can also reduce your monthly mortgage payment.

This is another very attractive reason to refinance that’s similar to the scenario above.

Except in this scenario, you use the extra cash from the equity to put in your pocket. Many homeowners choose this refinance option to remodel their home, pay college tuition, go on a vacation, buy a car or install a pool.