Reasons to refinance your home morgage and lower your mortgage costs

There are many reasons why you may want to refinance your home morgage

• to secure a lower interest rate thereby saving thousands of dollars over the life of the mortgage

 • to shorten the amortization period (the time required to pay off the morgage) and be mortgage free sooner

• to free up some accumulated home equity to cover other financial needs (i.e. home renovations, education, investments etc. )

• to change the term of your mortgage (the period of time during which the money is loaned)

• to change other terms of the mortgage such as fixed to variable rate mortgage, conventional to an interest only mortgage, changing your payment schedule etc. 

Lowering your mortgage interest rate 

One of the best reasons to refinance your mortgage is to lower the interest rate on your existing loan. Reducing your interest rate not only helps you save money, but increases the rate at which you build equity in your home, and can also decrease the size of your monthly payment. As an example, a 30-year fixed rate mortgage on $200,000 with an interest rate of 8% has a principal and interest payment of $1467.53. Whereas the same mortgage amount with an interest rate of 5% would reduce your payment to $1073.64.

Shortening the term of your mortgage

Another reason to refinance an existing loan is that when interest rates fall, you may have the opportunity to refinance a mortgage loan for another that, without much change in the monthly payment, has a shorter term. For that 30-year fixed-rate mortgage on a $200,000 home, refinancing from 8% to $5% would shorten the payout time to 15 years, with only a slight increase in the monthly payment. You would be mortgage free 15 years sooner.

Releasing mortgage equity 

One other reason to refinance a morgage is if you want to get access to money to renovate. You can increase the amount of your mortage and use the extra funds to improve you home and continue to increase the equity in your home.

WAYS TO REFINANCE

Refinance Your Home