Beyond buying the shiny new sports car that’ll have your neighbors drooling or that boat you know will fit all your friends, there are many logical reasons homeowners refinance. From getting a better interest rate to shortening the term of the loan or tapping into home equity, the possibilities, including that new car or boat, are endless. Sorta. Is anything really endless?
Past keeping up with the Jones’, here are the top 3 reasons to refinance:
Access Equity
Typically called a “cash-out” refinance, homeowners can use their home’s equity to pay for renovations, help their kids with a down payment, or even put it all on black roulette in Vegas. Although, lenders do have restrictions on these types of loans and they’re more likely to lend when the reason is investment-based. So, while you might not be able to justify using the cash to gamble in Vegas, you could certainly buy property there and rent it when you’re not living it up. Investment justified.
Lower Interest
Besides buying that new sports car, the most common reason to refinance is to get a lower mortgage rate. Most experts advise that you look at refinancing when you can lower your interest rate by a complete percent. While taking that into consideration, compare your closing costs to your additional savings and determine if it still makes sense for you.
Mortgage Free
Refinancing your 25-year fixed-rate mortgage to a 20-year fixed-rate or a 15-year fixed-rate is a sensible way to reduce your long-term mortgage costs. And a path to owning your home sooner. As a bonus, with mortgage rates currently near all-time lows, an increase to your monthly payment from a shorter loan term might just get you closer to retirement, too. Say hello to Palm Springs for us. We hear it’s all the rage.
What You Need to Know
While remortgaging makes sense for some, even after seeing the high costs, selling and buying a home is more practical for others. It all depends on your current and future needs and wants. Working with a local real estate agent is a great way to see which one is best for you.