Anyone paying monthly on a loan should be familiar with the opportunity to refinance, but what exactly does it mean to refinance and why do people do it?
At its most basic, a refinance is the revision of an existing loan. In terms of a mortgage, this often means satisfying the balance on an existing mortgage to replace it with a new one – often with terms more beneficial to the borrower.
Top 5 reasons to refinance
Everybody has their own individual motive for refinancing, but generally, there are five main goals:
One of the main reasons to refinance your mortgage is to get a lower interest rate. A lower interest rate means lower monthly payments and less lifetime interest. If you are able to secure a rate that is even 1/8th lower than your current rate, it could be worth considering a refinance.
If you have multiple debts with high-interest rates, a cash-out refinance could help you consolidate those debts into one monthly mortgage payment. By tapping into the equity in your home, you could potentially lower your overall interest rate and pay off your debts more quickly.
If you are in a better financial position than when you first took out your mortgage you may want to consider shortening the length of your loan to pay off more quickly. Conversely, if you need to lower you monthly payments, you could extend the length of your loan. Refinancing to a loan with a different term could help you better align your mortgage with your current financial situation.
Adjustable-rate mortgages (ARMs) may seem attractive because of their lower introductory rates, but once the initial period is over, the interest rate can fluctuate, making it difficult to budget for your monthly payments. Refinancing to a fixed-rate mortgage could provide more stability and predictability in your monthly payments.
If you have equity in your home, a cash-out refinance could allow you to access that equity and use it for other purposes, such as home renovations, college funds, or investments.
Overall, refinance your mortgage could be a smart move if it aligns with your financial goals and situation. It is important to consider all the potential benefits and drawbacks before making a decision.
Just like on a purchase mortgage, there can be closing costs associated with refinancing. Finding a company offering zero closing cost mortgages can help to avoid all those unnecessary fees.
Use CapCenter's Mortgage Calculator or talk to our Client Relations team to see if a CapCenter Zero Closing Cost mortgage is right for you.
Restrictions apply to our Zero Closing Cost Offer. See Disclosures for details.