Refinance Home Loans have become a HOT TOPIC in Raleigh…again! The Federal Reserve’s recent decision to lower the Prime Rate by ¼ percent has many people wondering if they should refinance their home loans. There are four primary reasons for refinancing a home loan.
Securing a Lower Interest Rate
One of the best reasons to refinance is to lower the interest rate on your existing loan. Reducing your interest rate not only helps you save money but it increases the rate at which you build equity in your home by decreasing the size of your monthly payment.
Shortening the Loan’s Term
When interest rates fall, homeowners often have the opportunity to refinance an existing loan for one with a shorter term with little to no affect on their current payment. This can save thousands by paying off the loan more quickly.
Converting Between Adjustable-Rate and Fixed-Rate Mortgages
While ARMs start out offering lower rates than fixed-rate mortgages, periodic adjustments often result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs converting to a fixed-rate mortgage results in a lower interest rate as well as eliminates concern over future interest rate hikes.
Tapping Equity and Consolidating Debt
Homeowners often access the equity in their homes to cover big expenses; such as the costs of home remodeling, consolidating unsecured or medical debt or a child’s college education. This is called a Cash Out Refinance. By securing the debt with your home you may able to save thousands with a lower interest rate.
In short, refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity more quickly. When used carefully, it can also be a valuable tool in getting your debt under control. As rates are dropping NOW may be the best time to refinance your home loan.
Interested in refinancing? Then call us to learn about current refinance rates! We are Raleigh’s own The Mortgage Professors.