Refinancing a mortgage has become a taboo term in some circles, but this is a truly false impression many people have. Refinancing is often a very smart move that can limit your financial burden and free up more flexibility, and there’s no shame whatsoever in looking to change up your payment structure.
At Primary Residential Mortgage, Inc., we’ve been helping clients in southwest Florida refinance mortgages for years with great results. We help educate our clients and review all the factors involved to get you the best situation possible.
Let’s go over some of the primary benefits of refinancing a mortgage.
The most common benefit people look for in a refinanced mortgage is lowering their monthly payments. This can be accomplished if mortgage rates are lower during your refinancing period than when you originally took out the mortgage – so long as you don’t shorten the term or cash out any of your equity, of course.
Even a very small reduction in interest rate can go a very long way during a refinancing. As a rule of thumb, if the current interest rate is lower than your mortgage rate by anything more than two percentage points, you should at least consider refinancing.
Refinancing a mortgage goes hand-in-hand with credit score – sometimes as a nice two-way street. Firstly, making on-time monthly mortgage payments will help raise your credit, which you can then use to refinance into lower monthly payments and continue the cycle.
Secondly, a form of refinancing where you cash out some of your equity (“cash-out” refinancing) can be a great way to find a bit of extra money to consolidate debt, another great way to raise your credit score.
It’s common for people to go for an adjustable rate mortgage when they first start out based on the low early interest rates, but the variability of these loans can be extreme in some cases. Refinancing is a great way to switch to a fixed rate mortgage, which offers fewer swings in interest rates and more certainty on monthly payments.
For people who have done a good job financially and have a bit of flexibility, mortgage refinancing again offers a couple great options for capitalizing on this success. If you have enough money to get ahead on payments, you might be able to shorten the term of your loan using your equity, or just pay more each month and finish it earlier.
You can also use that equity with a cash-out refinance to help consolidate debt, or to send a kid to college. All these are options that help lower your debt burden through refinancing a mortgage.
At Primary Residential Mortgage, Inc., we’re experts in all forms of mortgage refinancing, and we can point you in exactly the right direction for your specific needs. We’re looking forward to hearing from you today.