Benefits of Refinancing
- Lower Interest Rate. If market conditions cause rates to drop since you purchased your original mortgage, refinancing at a lower rate may lead to significant savings over the life of the loan.
- Reduce Monthly Payments. Securing a lower interest rate or extending the loan term may also decrease your monthly mortgage payments.
- Shorter Loan Term. Refinancing to a shorter loan term, for example going from a 30-year to a 15-year term, can help pay off the mortgage faster and save in interest over the life of the loan.
- Switch Loan Type. If you initially choose an Adjustable-Rate Mortgage (ARM), you may be able to refinance into a fixed-rate loan before the ARM rate adjusts, helping you save in interest costs. You may also refinance from an FHA loan to a Conventional mortgage and vice versa.
- Cash Out on Your Equity. When refinancing, you might opt for a cash-out refinance loan. This allows you to tap into the equity you’ve built in your home and receive the difference in cash to use as you wish, such as home renovation projects, tuition, or other large expenses.
- Pay Off Higher-Interest Debts. You can use the cash from your equity to pay other debts such as high-interest credit cards, car loans, or student loans.
- Eliminate Private Mortgage Insurance. In some cases, you may have to pay a monthly fee for mortgage insurance. Once you reach a certain equity threshold, some lenders allow you to remove the private mortgage insurance by refinancing.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
