When Does a Refinance Mortgage Make Sense?

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Question: when does a refinance mortgage make sense? This option could make sense for several different homeowners and different scenarios. Sometimes it's getting a lower interest rate...other times it's so you can cash out the equity in your home to pay off other bills. You may even consider refinancing your mortgage to get into a shorter term to pay it off quicker. Here's a look at a few reasons people consider a refinance mortgage.

• Lower your interest rate. If you bought your home more than a couple years ago, you're probably paying a higher interest rate than home buyers today. Rates are sitting near the 4% mark, so if you're paying 7% that's a significant difference.
• Cash out equity. Whether it's to buy a new car, pay off credit cards or maybe spruce up your house, cashing out your equity could help financially in other areas for you.
• Shorten the mortgage loan term. A 30-year mortgage is the most common term for home buyers. But going with a 15-year mortgage could actually lower your interest rate and pay off your loan in less time. Many times homeowners get to a point in their jobs and finances where they can afford the higher monthly payment that comes with a shorter-term mortgage.
• Refinance to remodel. One reason for a refinance mortgage not many people realize is available is to pay for home improvements and remodeling. Refinancing your mortgage into a home improvement loan like the FHA 203k can help you get that new kitchen, replace old windows, get new flooring or replace your roof. This is a popular option for homeowners who have little equity built up they can cash out.

Regardless of the reason to refinance that mortgage loan, you can always go with your current bank or the bank where your checking account is held. Or you can shop around for the best interest rate. You should also look at things like customer service, closing times and whether the lender will sell your mortgage once it's closed. Paying your mortgage to the same lender for the next few decades may be the best way to go. A community mortgage lender like AmeriFirst can make this happen so you're not chasing your mortgage all over the country.

Learn more about the renovation option for a refinance mortgage with "The Ultimate Guide to Home Improvement Loans" at the button below. The free guide will help you narrow down your options to decide what's best for you.

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