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Home / Blog / Refinance / Why Homeowners Should Refinance Their Mortgage

Why Homeowners Should Refinance Their Mortgage

March 10, 2022 By Admin

Mortgage RefinanceRefinancing a mortgage is a process that involves paying off a current mortgage loan and replacing it with a new mortgage loan. While refinancing is a big decision, there are several reasons why homeowners decide to refinance their mortgages.

Reasons Homeowners Refinance Mortgages

  • Lower mortgage interest rates.
  • Shorten the loan’s term.
  • Convert to a fixed-rate mortgage (FRM) or an adjustable-rate mortgage (ARM).
  • Access home equity, consolidate debt, or financial emergencies.

However, homeowners should be aware that there are costs associated with refinancing a mortgage, such as:

  • Closing costs.
  • Title Insurance fees.
  • Application Fees.
  • Appraisal Fees.

Homeowners can compare the out-of-pocket costs versus the benefits to determine whether refinancing is a wise decision.

By calculating these figures, homeowners can determine whether refinancing is beneficial based on their current financial situation and future financial goals.

Related: Refinancing Your Mortgage Could Save You Money

Refinance to Get a Lower Interest Rate

Mortgage interest rates fluctuate over time. Refinancing to secure a lower interest rate can save money on monthly payments and the loan’s overall cost.

Financial experts suggest refinancing is a good decision if homeowners can reduce their interest rate by 2% or more. Some lenders advise that even a 1% reduction is worth considering.

Refinance to Reduce the Loan Term

When interest rates fall, homeowners sometimes refinance an existing loan to a loan that has a shorter term. Refinancing to a shorter-term loan will slightly increase the monthly payment.

Refinancing to Change from an FRM to an ARM

Adjustable-rate mortgages generally start with lower interest rates, but this can change over time, resulting in a mortgage rate that is comparatively higher than the current fixed-rate mortgage levels. In cases like this, converting to a fixed-rate mortgage allows homeowners to access lower interest rates.

However, some homeowners choose to convert from a fixed-rate mortgage to an adjustable-rate mortgage. Converting to an adjustable-rate mortgage can benefit homeowners looking to lower their monthly payments while securing a low interest rate.

Over recent years, mortgage rates have been declining, so refinancing to an adjustable-rate mortgage will have made sense to take advantage of these incremental drops, resulting in a lower total repayment and lower monthly repayments.

Refinancing to Access Loan Equity

One reason homeowners might choose to refinance is to access home equity. Occasionally, homeowners access their home equity to cover major expenses, such as home renovations or college education.

Interest on mortgages is tax-deductible. However, rarely is it a wise financial decision to increase the number of years owed on a mortgage.

Another reason for refinancing can be to consolidate debts. Replacing a high-interest loan with a low-interest loan is a good idea as long as homeowners can keep future expenses to a minimum, keeping them from falling into debt.

Marimark Mortgage

Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.

We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.

To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.

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Filed Under: Refinance

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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    Refinancing with Mary an absolute pleasure

     
    Refinancing with Mary has been an absolute pleasure. I have never been through the process before and she took the time to explain each step. She was prompt (had a rate locked in right away) and most importantly always answered the phone or emails almost immediately! The communication line alone made the refinancing process every bit worth it. Would recommend to anyone, and will be back for any future purchases! Bret Brennan, March 2021
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