Mortgage refinancing is one of the options you may have to effect changes on an existing loan.
There are several reasons you may refinance a mortgage in Salt Lake City:
- You would like to take advantage of lower interest rates
- You are interested in a shorter mortgage term
- You would like to replace your current fixed-rate mortgage with an adjustable-rate mortgage (ARM), or your ARM with a fixed-rate loan
- A large purchase or considerable expense is coming up, and you’d like to use the equity in your home
- You’re in the process of consolidating your debts
Lower Interest Rates
For most people, the best reason to apply for a refinance is to take advantage of lower interest rates on the market. Interest reductions of as little as 1% should be reason enough to do it.
That percentage might seem small, but it will give you considerable savings and speeds up building the equity of your home. Your monthly payment will go down, as well.
When the market paves the way for lower interest rates, it might be possible to pay just a slightly higher monthly and significantly reduce the length of your loan’s term. It is important to monitor the interest rates in your area from time to time.
Converting Your Loan Type
It is advisable to refinance and change your ARM to a fixed-rate mortgage when the interest rates have become higher with your ARM than the rates on fixed-rate mortgages. If the interest rates in your area are falling, however, you do not have to be stuck with a high-interest rate in a fixed-rate loan. Refinance and convert to an ARM.
Like taking out a new mortgage to use your home’s equity, debt consolidation is not as straightforward as it may seem. Only refinance for this reason if you can be sure you can keep a tight leash on your spending when you consolidate and pay off your loans.
Refinancing your mortgage can leave you a bit more wiggle room with your loan. But be careful with your reasons for doing it. The best reason to do it is to unburden yourself from more expenses in the future.