Rising Rate Refinancing : 5 Ways to Save
With interest rates trending higher we typically see refinances go down. However, there are several reasons to refinance other than lowering your rate. Let’s take a look at five reasons why you might want to consider a refinance even with rising rates.
Shift to a shorter loan.
15-year mortgage rates typically run below 30-year rates. So, even if rates overall have moved a bit higher, there might still be room to lower your interest rate by shifting to a shorter loan. Also, even without dropping your rate a shift to a shorter loan will save you interest costs in the long run because you will be paying interest over fewer years.
Consider variable rates for short time horizons.
If you anticipate being able to pay of your mortgage in a few years, consider a shift to an adjustable-rate mortgage (ARM). These offer even lower rates than 15-year loans, and if you choose an ARM with a long initial reset period, you can reduce your exposure to rising rates.
Take advantage of improved credit.
The job market has gotten stronger in recent years, and now that you’re a few years older perhaps your income and credit rating have improved from when you first got your mortgage. If so, this might help you qualify for a lower mortgage rate, and make refinancing worthwhile even though average rates have started to rise.
Access the equity in your home.
Typically, your home will appreciate over time and by making payments you gain equity in the house. Taking this equity out could be a smart decision. If you have high interest debt, you could consolidate it. Also, if you have home improvements that would further increase the value of your home, you can take money out to do them.
Use refinancing for payment management.
Lowering your mortgage rate is not the only reason to refinance. If you are having trouble making your monthly payments, refinancing to a longer repayment period can help make those payments more manageable. Even though this is likely to result in you paying more interest over the life of the loan, it is preferable to risking default. Another option is using cash-out refinancing for debt consolidation, because mortgages are still cheaper than most other sources of debt, such as credit cards.
Refinancing your home can be a big decision, so be sure to reach out to a professional. Call me at (314) 472- DOUG (3684) and I can discuss your exact situation with you and see if refinancing is right for you.
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