Five Reasons to Refinance Your Home
Refinancing a mortgage may help you save money, get better terms, or free up cash for major purchases.
Chances are, you know someone who has recently refinanced their home. Maybe you’ve wondered why they did it, and if refinancing would be a good idea for you as well. Here are five advantages of refinancing; if any of them apply to your situation, it may be time to talk to your bank about a new mortgage.
1. Get a better rate
In November 2016, the average 30-year fixed-rate mortgage rate was 4.13 percent. A year later, it’s now around 4.7 percent, and experts predict it will keep rising for the foreseeable future.1 If you haven't refinanced, now might be the time to do it. You could be among those making significant savings by refinancing while rates are lower.
Online savings calculators can help give you an idea of the kind of savings you can expect. Just search online for "mortgage refinancing calculator" for a variety of options. Nevada State Bank also lets you compare rates and options with this tool.
2. Shorten your loan's term
Beyond getting a better rate on your mortgage, refinancing can help you reduce the length of your loan's term so you can pay it off sooner. Few things in life offer more peace of mind than having a home paid off, and refinancing may help you achieve that more quickly. However, to do so, you will probably need to adjust your monthly payments upward.
3. Switch between adjustable-rate and fixed-rate mortgages
Refinancing also allows you to switch between an adjustable-rate and a fixed-rate mortgage. With a fixed-rate mortgage, your interest rate is set at the beginning of your loan and does not change over time, while an adjustable-rate mortgage, or ARM, means your interest rate may fluctuate. Typically, an ARM will start with a lower rate than the fixed-rate alternative, but eventually, it will most likely go higher. Refinancing is a chance to switch to the model that works best for you.
4. You have other debts to consider
As previously mentioned, refinancing your home can save you a significant amount of money each year, and if you have other debts to consider, this can free up some cash to help take care of them. For example, if you recently had your HVAC unit replaced and needed to finance its cost, which was likely thousands of dollars, refinancing your home may help give you the opportunity to pay that off more quickly. An auto loan, credit card debt, or any other debts you owe will probably be at a higher interest rate than a mortgage.
5. You have a significant purchase to make
Just as refinancing your home may free up money to pay off other debts, it can also help you with a significant purchase you want to make. Perhaps you're in need of a new vehicle, but another monthly payment of that size just isn't in your budget. Refinancing may help. Maybe you have a major home improvement project you'd like to tackle. Once again, your refinanced mortgage may be able to support that.
There are a variety of reasons one might wish to refinance their home, but the common thread among them is that you're likely to save money. If this is something you think can help in your day-to-day life, don't hesitate to ask your banker to help you look into your options.*
*Loans subject to credit approval, terms and conditions apply.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.