For many homeowners, refinancing could provide several potential benefits. One of the primary reasons why people refinance their mortgage is to lower the interest rate. If rates have dropped since you last financed your home, you may want to consider refinancing. Other common reasons to refinance include paying off a balloon payment, converting an adjustable rate loan to a fixed rate loan, or being able to extract cash equity from your home (cash out). Sometimes homeowners cash out to make home improvements, to create an education fund, or consolidate debt. The exact reasons why someone should refinance may vary and should be considered carefully. However, choosing the right time to refinance can be equally important. Here are five reasons why now is a good time to refinance.
Rates could be on the rise
The average 30-year fixed mortgage rate rose above 3.0% once again in the past week, and may continue to rise slowly. If you are thinking of refinancing your home, now may be a good time to start the process so that you can lock in rates before they have a chance to rise.
Interest rates are still low
Rates are still low! Looking at where rates have been historically, refinancing now is still an unusually great deal, despite the recent rate rise.
Don’t be left out
Over 70% of homeowners have not taken advantage of the low rates during the pandemic, and still have yet to refinance. The opportunity will eventually pass and you don’t want to find yourself wishing that you had seized the chance to save money.
Lower your monthly payments
Borrowers can cut down their monthly payments and free up more of their income going into the next year. This could leave more funds for home projects, savings, or offsetting the potential increase in monthly expenses due to the rising prices of consumer goods.
Higher home values
The real estate market has seen historic increases in home values in recent months. Many homeowners have more equity in their homes than ever before. This will give you a lower LTV (loan-to-value) ratio, which could potentially make it easier for you to get approved and qualify for an even better rate. It could also help if you are looking to cash-out.
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