Why Should I Refinance My Home?

Many people don't think of their home as an investment. They think of it as a place where their family and friends gather, their children are raised, and they can relax after a long day of school or work. However, your home is an investment, and refinancing is one way to leverage that investment. 

What is Refinancing?

You can essentially think of refinancing as trading in your current mortgage for a newer one. You new mortgage will have a new principal as well as a new interest rate. Your lender will then use your new mortgage to pay off your old one, and you will be left with just one loan.

There are many reasons to refinance. Below are just a few reasons why many people decide to do so.

Lower Interest Rate

Interest rates fluctuate often. If the rates are currently lower than when you initially took out your loan, now may be a good time to refinance. By locking in a lower interest rate, you may lessen your monthly payment as well as pay less in interest over the life of your loan.

Shorten Loan Term

The shorter your loan term is, the less interest you pay. For example, when you first purchased your home you had a 30 year mortgage, however, now you can afford a higher payment per month, so you may want to refinance to a 15 year loan term. This means you may also get a better interest rate and pay even less interest through the end of your loan. Opposite of that you may also lengthen your loan term to pay less each month, however, you will end up paying more in interest.

Cash Out Equity

A cash-out refinance means that you borrow more than you owe, thus keeping some of the loan for yourself. This may be done to make improvements to your home, pay off debt, or any other life events. Using cash from your home also allows you to take out a loan at a lower interest rate. Keep in mind that a cash out refinance does have some tax implications.

Change of Loan Type

There are a plethora of reasons you may want to change your loan type. Perhaps you initially took out an adjustable-rate mortgage (ARM) to save on interest, however, now there are lower interest rates and you would like to refinance your ARM to a fixed-rate mortgage. Another scenario is that you have enough home equity to refinance your FHA loan to a conventional loan without paying for private mortgage insurance.

No matter what your reason for refinancing, our dedicated and knowledgeable team is here to assist you with any questions you may have on your refinancing journey. With several offices throughout southern Wisconsin, there is sure to be a loan officer near you.