When you refinance your mortgage, you replace your current loan with a new one. In most cases, you'll try to find one that has lower interest rates and lower monthly payments. However, each person refinances for different reasons, and there are lots of ways you can benefit.
Here are some of the benefits of mortgage refinance programs:
Lower Your Monthly Payments
When you first purchased your home, you might have locked yourself into a mortgage with high monthly payments. If you use a refinancing program to get a new loan with lower monthly rates, you could drastically lower the amount you pay each month. Even if you can't get a better rate, you could potentially extend the length of your loan to lower your monthly payments.
Lower Your Interest Rates
Many people are in desperate situations when they first get a mortgage loan and may be more willing to take on high interest rates. However, if you can refinance your mortgage, you may be in a better position to get a lower interest rate. The lower your interest rates are, the less you'll pay over the life of the loan.
Shorten Your Loan
If you want to shorten your mortgage loan, you can refinance with better conditions and continue paying the same amount you have been. Rather than lowering your payments due to the lower interest rates you qualify for, you can continue paying the same amount and shorten the terms of the loan instead.
Access Your Home's Equity
If you've been paying your mortgage for a few years, and your home's value has been increasing, you could access some of that equity by using a refinancing program. If you can refinance based on the amount you still owe and the property's current value, there could be a large amount of funds available for you to access.
Pay Off High-Interest Debts
If you manage to access your home's equity through refinancing, you could use that money to pay off any of your high-interest debts. The amount you spend on interest each year adds up, and if you can pay those debts off, you'll avoid paying all the interest fees going forward.
Fix or Add an Addition to Your Home
Another reason people refinance their mortgages to access their home's equity is to make home repairs or even build an addition. Doing these things is wise because although you're tapping into your home's equity, you're building it back up by increasing the value of your home.