Buying a home is one of the biggest investments you’ll make in your life, so it’s important to know when refinancing makes sense. Refinancing at a lower interest rate and taking out cash from your equity can give you more money in the long run.
You may also want to refinance if you’re underwater on your mortgage–meaning that the total amount owed on your house exceeds its value–to get yourself back above water.
Refinancing is not always the best idea, though; for example, if rates are high enough to offset any savings or if there are other circumstances that could cause problems with refinancing (such as being upside down). That’s why it’s important to consult an experienced Washington DC mortgage lender before you refinance.
Reasons You May Want To Refinance Your Home
To Get a Lower Interest Rate
If interest rates are a lot lower than your current rate, then it may be a great time to refinance. Depending on the size of your mortgage and how much interest you’ll pay, refinancing could save you a lot of money.
To Pay Off Your Mortgage Early
If you’re looking to get out from under a large debt early like paying off college loans or putting down payments for new cars, then it may be worth considering refinancing into an adjustable-rate loan. The low introductory rate can help lighten your debt load now and in the interim while gradually increasing rates when needed.
When You Have More Equity Than Necessary
The most common instance where homeowners refinance is when they have more equity than necessary–which means that their home has increased in value since they bought it but they still owe more on their house than what it is worth.
When You’re Underwater on Your Mortgage
If you owe more than what your home is currently worth, then refinancing can help get yourself back above water by allowing the equity in your house to be put towards paying off some of that debt while giving you a lower monthly payment for living expenses.
To Get Cash Out of Your Home Equity
You may also want to refinance if you’re looking for cash from your home equity. It can be an excellent way to get some extra money for a new car or other major purchase by taking out a second mortgage, lines of credit, or refinancing into another kind of loan.
If You Want a Lower (or Higher) Monthly Payment
Finally, you may want to refinance if you’re looking for a new home and need the lower monthly payments that come with an adjustable-rate mortgage.
