Refinancing your mortgage now at historically low-interest rates can be a great financial move that could potentially save you tens of thousands of dollars of interest expense over the life of your loan. If you’re just starting to learn about refinancing, or you’re getting ready to refinance your home, it helps to know more about the process, and the different types of refinance loans that are available so that you can make an informed decision as you begin the process.
When does it make sense to refinance a mortgage?
The most popular reason to refinance is to obtain a lower interest rate and monthly payment on your loan while maintaining a similar loan term. This will enable you to lower your monthly payment. Another great reason to refinance is to lower your term from 30 years to 20 or even 15 years. By lowering your term, you will significantly decrease the interest expense on your loan. Other reasons include tapping into home equity to pay for home renovations or to consolidate debt, switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, and removing private mortgage insurance (PMI). If you have an FHA loan, it may make sense to refinance into a conventional loan to remove the mortgage insurance premium, potentially resulting in a lower monthly payment.
Is now a good time to refinance a mortgage?
Mortgage rates are currently at historic low levels, which means it’s not only a great time for first-time homebuyers to purchase a home, but it may be the perfect time to refinance your current mortgage. Refinancing your mortgage when rates are at historical lows could save you a significant amount of money in the long term and in your monthly payment.