Regardless of the need, the ultimate decision is up to you – based on your individual financial situation – whether now is a good time to refinance. However, you can rest assured we’re always here at 1-800-734-REFI if you still have refinancing questions after reading about the different situations below.
Adjustable-Rate Mortgage To Fixed-Rate Mortgage
The rates for adjustable-rate mortgages (ARMs) are just that – adjustable. They can go up and down and are somewhat determined by the actions of the Federal Reserve – aka The Fed. If the Fed raises rates, this usually causes mortgage rates to increase. In an economic climate like this, it's smart to refinance with a fixed-rate mortgage. On the flip side, if the Fed lowers rates, the rates on adjustable-rate mortgages (ARMs) usually follow suit and may provide a better fit for your particular refinancing situation.
Another part of the refinance equation to think about is how long you expect to be in your home. If you plan to stick around for only a few years, then it might not make sense to incur a cost to refinance that won't be recouped by the time you sell your house. However, if you plan to stay around longer than 5-7 years, refinancing is an option you should probably seriously consider.
Check out our easy-to-understand chart, which includes all our mortgage loan options, here.
Fixed-Rate Mortgage To Adjustable-Rate Mortgage
As we just talked about, many times the deciding factor between refinancing with an adjustable-rate mortgage (ARM) and a fixed-rate mortgage can depend on how long you plan on being in your home. If your intent is to remain there for less than 5-7 years, then it may not make sense to pay a higher interest rate associated with refinancing with a traditional 30-year fixed-rate mortgage. The result could be less money in your pocket. Here, an ARM is a good refinancing choice – you get a lower rate and a lower monthly payment.
Reduce Your Monthly Payments
Obviously, we all want to keep more of our money. The discussions above cover this as part of an overall look at your personal financial situation. But, sometimes the only concern is to drop what you're paying, right now. So, here are a few different ways you can lower your monthly mortgage payment.
The first way is easy: refinance to a lower interest rate either through a new fixed-rate mortgage or adjustable-rate mortgage (ARM). Most times, a lower rate means a lower monthly payment.
Number two is simple as well – just change the length of your mortgage – but needs a little more explanation. Say you currently have a 15 year fixed-rate mortgage. If you just refinance and convert it to a 30 year fixed-rate mortgage, the amount you owe will be spread out over a longer time, and therefore, your payment will drop on a monthly basis. Conversely, if you'd like to pad your savings, just refinance and reduce your 30 year fixed-rate mortgage to a lesser term like 15 or 20. Yes, your payment will increase, but the shorter length will save you a bunch of money over time that would have been previously paid as interest.
Another way to drop your payment through a refinance is with an interest-only loan. Here, the only money you must pay is a monthly interest payment – no principal is included. This refinancing scenario gives you the flexibility to get into a bigger home that might have been pushing your budget or contribute to your savings account, 401k or your child's college tuition. Plus, you can always contribute to principal whenever you'd like.
If this sounds good, take a look at all our mortgage refinance loan options here.
Cash-Out
When you look at your home, do you see it as a bank? Well, depending on your situation, it might be. If you've built up a nice level of equity in your home, you might have the opportunity to refinance and take out some of that money – known as cash-out refinancing. This is usually done when you want to finance an important home improvement, pay off credit card debt or pay for college. There are a million more reasons why cash-out refinancing might be a good choice for you so keep it in mind.
We're always here to help at Refinance.com. Here's a great page to reference all of our loan options, but if this still leaves you with questions, just give us a call at 1-800-734-REFI. We can talk about your goals and then help you determine whether refinancing is a good idea right now. It's what we've been doing for nearly 20 years so you can bet we're ready for your 20 questions.
