Benefits to Refinancing
The most common reason for refinancing is to save money. Saving money through refinancing can be achieved several ways. The two most common ways are:
- Obtaining a lower interest rate that causes one’s monthly mortgage payment to be reduced.
- Reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total interest paid during the life of the loan can be reduced significantly.
People also refinance to convert their adjustable loan to a fixed loan. The main reason for doing this is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.
Homeowners refinance to consolidate debts and replace high-rate loans with a low-rate mortgage. The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, etc. In many cases, debt consolidation results in tax savings, since consumer loans are not tax deductible, while a mortgage loan is usually tax deductible.
Sometimes, you do not have a choice – you are forced to refinance. This happens when you have a loan with a balloon payment and no conversion option. In this case, it is best to refinance a few months before the balloon payment is due. Whatever your reason for refinancing, consulting with a seasoned mortgage professional can save you time and money.
To be sure that you choose the mortgage that best fits your specific situation, contact the experienced pros at American Mortgage Brokers. We know your local market and can fit the right mortgage loan to your specific needs.