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Is now a good time to consider a refinance?

Reasons to refinance

Is now a good time to refinance? The advantages to refinancing could be numerous.

Once you’ve decided to refinance, grab a Quick Quote for an accurate estimate of your closing costs.

1. Reduce your interest rate and lower your payment.

This is why most people refinance since lower interest rates mean lower payments. In addition, your monthly payment may also be reduced if you switch to a lower rate adjustable rate mortgage or extend your term.

You may be able to finance your mortgage closing costs into your new loan and still end up with a lower rate mortgage and monthly payment. However, you have to weigh the upfront costs of refinancing against the potential savings in your monthly payment. A common rule of thumb is to try to recover the cost of refinancing within two years.

2. Build equity in your house faster.

When current market interest rates are lower than your existing mortgage rate, refinancing to a shorter term mortgage can save you thousands of dollars in interest charges over the life of the loan. This could be the case even though your monthly payment stays the same, or increases. Your equity will build up faster and your loan will pay off sooner.

3. Liquidate equity to take “cash out” of the property.

Borrowing against the equity in your home can be a low cost (and usually tax deductible) way to get needed cash. If you’ve built up considerable equity in your home through long-term ownership, real estate appreciation, and principal reduction, you may be eligible to take cash out.

Mortgage interest rates are often less than other types of consumer loans, and the potential tax deductibility of the interest can reduce the “after tax” cost even further. Be sure to compare the short-term advantages with the long-term costs.

4. Consolidate your debts.

You may be able to consolidate your personal debt if you’ve built equity in your home. Interest rates on credit cards, auto loans, and second mortgages often carry an interest rate far higher than that of a refinanced mortgage. Consolidating your personal debt through a refinancing program may also provide attractive tax advantages (consult your tax adviser). This is because interest paid on most home mortgages is tax deductible. Interest on most other personal debt is not tax deductible.

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