Benefits of Refinancing Your Mortgage
I’ve been a Brooklyn mortgage broker for many years and am often asked for advice regarding whether it’s beneficial to refinance your mortgage. This can depend on your reason for refinancing and there are a few options to look into when doing so. Your financial situation needs to be taken into consideration to see if it is the right choice for you. Today, I want to share the benefits of refinancing your mortgage.
You Can Lower Your Monthly Payments
Choosing to refinance your mortgage at the right time can make a huge difference in how much you could lower your payments each month. If mortgage rates drop lower than your current rate, for example, refinancing will get you that lower rate and leave you some extra money at the end of the month. You can use that extra money to put towards something you need or want to do, like renovations. Or, you can keep paying your original monthly payments, resulting in your mortgage getting paid off earlier.
You Can Manage Your Credit Better
Refinancing can be used to consolidate debts to raise your credit score. For example, choosing a cash-out option when refinancing gives you the money you need to pay off your other debts. This is especially beneficial if you have credit cards, which have much higher rates than loans do. This saves you money each month and further helps your credit.
Your credit score also improves when you have been making your monthly repayments consistently on time. When your credit score gets better, you can get lower interest rates. You can take advantage of this by refinancing to a mortgage loan with lower rates, which lowers your monthly repayments.
Move from an Adjustable Rate To a Fixed Rate Program
You may have gone for an adjustable-rate mortgage at the time of applying for one because of the low rate you would be getting for the first few years. When that time is up, you can suddenly find your rates, and your monthly payments, have gone up significantly. Before this happens, you can refinance your mortgage and switch to a fixed rate program instead. This gives you the benefit of stability in your monthly repayments.
You Can Build Up the Equity in Your Home Quicker
If you refinance your mortgage and go for a shorter term, for example, going from a 30 to a 20 or 15-year term, it allows you to build up the equity in your home quicker. This is a good choice in situations where you have an unexpected windfall or get a rise in your pay. You can refinance your mortgage and put that extra money towards the balance, saving you on financing fees.
You Can Pay Your Mortgage Off Faster
If you plan on living in your home for many years you may want to consider a refinance to get your mortgage paid off quicker. For example, if your monthly repayments are $400 a month and you get a pay rise that gives you $100 more a month, you can add that extra to your repayments. So, you would be paying $500 a month on your repayments and could potentially pay off your mortgage a few years earlier. This will also save you a lot of money on your interest payments.
If you’ve been considering refinancing your mortgage, give our Brooklyn mortgage broker team a call today. We can show you what options are available to you and help you save!
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