Refinancing may be the right decision if your home value significantly increased or current interest rates are low. You may even be able to:
Shorten your loan’s term to save even more money
Refinance to a lower interest rate which might also lower your monthly payments
Convert your adjustable-rate mortgage (ARM) to a fixed-rate loan which will keep your payments safe from possible interest rate increases
Combine a first and second lien to a single loan for simplicity and savings
Consolidate debt from higher interest rate credit cards or subordinate financed loans into one loan which may result in lower monthly payments
Turn your home equity into cash
A cash-out refinance allows you to take cash out of your home equity by replacing your current mortgage with a new loan that is more than the amount owed. This option can help you pay for major expenses like college tuition, debt or home improvements.
Adjustable-Rate Mortgage (ARM)
Typically adjustable-rate mortgages offer low introductory rates and payments that can change periodically after the initial fixed-rate period. An ARM could be the right choice for you if you plan on staying in your home for just a few years, you’re expecting a future pay increase, or the current interest rate on a fixed-rate mortgage is too high.
Fixed-rate mortgages protect you against rising rates since the interest rate remains the same for the entire term of the loan. You can select a 30-, 20- or 15-year term, but keep in mind lower term options have higher monthly payments which means you are building home equity faster. If you plan on staying in your home for a longer time frame, a fixed-rate mortgage could be the right solution for you.