Buying a home is one way to gain a valuable asset that often increases in value over time, but you can only realize the value of it when you sell your home. If you don’t plan to sell anytime soon, there is another way that you can use the value of your home to get cash in your pocket today and pay for things like remodeling, vacations, college, or pay down other high-interest loans and debt; it may also improve your interest rate and lower your monthly payments. Refinancing a mortgage is a great option for many homeowners.
Home values in Utah have grown exponentially in recent years, and are expected to continue to outpace the national average. Increased home values offer current homeowners the opportunity to borrow against the equity in your home. With mortgage rates currently at one of their lowest points in recent history, borrowing money against your home’s equity is often less expensive than obtaining other higher-interest personal loans or putting debt on a credit card.
When you opt to refinance, the amount you borrow will be added to the current mortgage principle that you owe, and you get a check for the difference at closing.
While getting some additional cash to pay for expenses can be very helpful, there are other reasons to consider refinancing now. Interest rates continue to remain low, so if you have a rate above 4% or your credit score has improved since you first bought your home and you could qualify for a much lower rate, that will lower your monthly payment and the amount of interest you pay over the life of the loan. Refinancing out of an ARM (adjustable-rate mortgage) into a fixed-rate loan can also provide you with more predictable monthly payments.
Depending on your financial situation, you could also refinance into a shorter-term loan, for example, going from a 30-year to a 15-year mortgage. While this may result in a slightly higher payment, it will help you pay off the home faster and pay less interest over time. Interest rates are also lower on 15-year loans, so this is a great option if you can afford it.
It’s important to note that refinancing is not always the best option for every buyer, and that refinancing will increase the total amount you owe on a mortgage so the decision should be made carefully. Talk to the knowledgeable team at Integrity First Lending to find out whether it is the right choice for you.