There are several important factors you should consider before you refinance your mortgage this year, including current rates and your financial situation.
Are you tired of paying out exorbitant amounts of money towards the interest portion of your mortgage? If so, perhaps a mortgage refinance can help you save on interest payments.
In This Article:
- What is Mortgage Refinancing?
- Reasons to Refinance
- Why is it a Good Idea to Refinance Right Now?
With a mortgage, you’re not only paying back the principal amount that you had to borrow in order to buy your home, but you’re also paying an interest portion.
The interest rate you locked in at when you first took out your mortgage plays a direct role in the overall amount you have to repay by the end of your mortgage term. The higher the rate, the more money you have to pay out.
But what if there was a way to pay less in terms of interest, and therefore reduce the overall amount you’re obligated to pay back?
A mortgage refinance can help. If the interest rate you’re currently paying is a lot higher than what the going rates are today, you could refinance to lock in at today’s lower rates, which can save you tens of thousands of dollars over the life of your home loan.
What is Mortgage Refinancing?
Refinancing a mortgage means paying off an existing mortgage and replacing it with a new one. The process involves taking out a new mortgage at a much lower interest rate, and paying off your current mortgage. What you’ll be left with is a mortgage that has a lower interest rate than what you were being previously charged.
In turn, this can save you quite a bit of money over the long run that you are required to pay in interest.
Reasons to Refinance
There are four main reasons why homeowners refinance:
- To obtain a lower interest rate. It makes most sense to refinance your mortgage if you can get an interest rate that is much lower than what you are being charged on your current mortgage.
- To shorten the term of a mortgage. If you want to be mortgage-free sooner rather than later, you may want to shorten your mortgage term, which can be done when you refinance. By shortening your mortgage term, your mortgage payments will be higher, but you’ll be paying a lot less interest over the life of your mortgage.
- To convert from an adjustable-rate to a fixed-rate mortgage, or vice versa. If you currently have an adjustable-rate mortgage but would prefer to swap into a fixed-rate mortgage and lock in at a very low mortgage rate, you may do so by refinancing your home loan.
- To tap into home equity. If you have built up a sizable amount of equity in your home, you can refinance your mortgage to use that equity for a variety of purposes. Maybe you want to remodel your home, or perhaps you want to pay for your child’s college education in full. Whatever the case may be, you may be able to access a large sum of money from your home equity by refinancing your mortgage.
Why is it a Good Idea to Refinance Right Now?
Interest rates change daily, but right now they’re at historical lows. As the year progresses, interest rates will slowly increase. So right now is the right time to refinance if your current mortgage rate is higher than 3%. Mortgage rates have been well under the 3% mark for months, so you’d be able to snag a very low rate right now by refinancing.
At Sammamish Mortgage, we offer some of the most competitive rates, and we are ready to make your mortgage refinance a quick and hassle-free experience. Everything can be done online, at any time, and from any device.
Serving the Pacific Northwest since 1992, including Washington, Oregon, Idaho, and Colorado. Give us a call today at 1-866-751-1439. Or visit our website at SammamishMortgage.com.