Choice Lending Group

Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance: the opportunity to obtain a lower interest rate; the chance to shorten the term of their mortgage; the desire to convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa; the opportunity to tap a home's equity in order to finance a large purchase; and the desire to consolidate debt.

LOWERING THE INTEREST RATE - One of the best reasons to refinance is to lower the interest rate on your existing loan. Even a .25 % reduction could be worth it to refinance.  Reducing your interest rate not only helps you save money, it also increases the rate at which you build equity in your home, and it can decrease the size of your monthly payment.

SHORTENING THE LOANS TERM - When interest rates fall, homeowners often have the opportunity to refinance an existing loan for another loan that, without much change in the monthly payment, has a significantly shorter term.

CONVERTING BETWEEN ADJUSTABLE-RATE AND FIXED-RATE MORTGAGES

While ARMs often start out offering lower rates than fixed-rate mortgages, periodic adjustments often result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to a fixed-rate mortgage results in a lower interest rate and eliminates concern over future interest rate hikes.  Conversely, converting from a fixed-rate loan to an ARM can also be a sound financial strategy, particularly in a falling interest rate environment. If rates continue to fall, the periodic rate adjustments on an ARM result in decreasing rates and smaller monthly mortgage payments, eliminating the need to refinance every time rates drop.

USING EQUITY AND CONSOLIDATING DEBT

Homeowners often access the equity in their homes to cover major expenses, such as the costs of home remodeling or a child's college education. This can add value as remodeling adds value to your for many interest on mortgages is tax deductible. Many homeowners refinance to consolidate their debt. This can be a very attractive way to change your finances and finally have enough cash-flow to stay on budget.

THE BOTTOMLINE

Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity more quickly. When used carefully, it can also be a valuable tool in getting debt under control.

Contact us to learn more and see if refinancing your current loan is a way to achieve your goals.