Benefits of Refinancing

You may want to refinance your mortgage for several reasons. You could save money by paying off your mortgage faster or by lowering your monthly payments. You can build home equity faster, or use the new mortgage to consolidate debt, pay for home improvements or plan for future big expenses.

Get extra cash at closing.

By refinancing more than the amount you currently owe on your loan, you may be able to receive additional cash at closing.

For example, if your home is worth $200,000, and you still owe $100,000 on your mortgage, you could refinance $120,000 and take out the extra $20,000 in cash. Your costs are still consolidated in one mortgage payment, but now you have the extra money to help pay for other expenses.

Lower your monthly payments.

By locking in at a lower interest rate for the life of your home loan, you will benefit from a decreased monthly payment (and overall cost of the mortgage). Even a small dip in rates could save you a substantial amount of money each month.

For instance, if your current $150,000 mortgage was settled at 8.5%, and you refinanced at 6.25%, you would save nearly $205 a month.

Build up equity, pay off debt faster.

If you shorten the term of your mortgage, you may increase your monthly payment amount. But in the long run, shorter terms will dramatically reduce your total housing costs and build up equity in your home faster.

Consider an original $200,000, 30-year term mortgage at a fixed interest rate of 6.25%. If you were to refinance by shortening the term to 20-years with no change in the interest rate, your monthly payment would go up, but you could potentially save thousands of dollars over the life of the loan.

Focus on short-term savings.

If you are planning on staying in your home for just a few more years, you could switch from a Fixed Rate to an Adjustable Rate Mortgage (ARM) to achieve short-term savings. An ARM may initially provide a lower interest rate that may make your monthly payments smaller, providing you with immediate short-term gains.

For instance, if you were to refinance a $250,000 Fixed Rate Mortgage that has a term of 30 years at 6.25% with an ARM that has an initial interest rate of 5%, you could save nearly $200 a month.

Achieve long-term peace of mind.

If your current adjustable-rate mortgage is causing you to worry about which direction the market will go, a fixed-rate mortgage may provide you with peace of mind and the potential to save money over the long-term.

For example, your $100,000 Fixed Rate Mortgage with a term of 6.25% will cost a total of $221,656.04 over the course of a 30-year loan, whereas a $100,000 ARM at 5.00% will cost $255.866.49. That is a savings of over $34,000 over the life of the loan.

Consolidate debt.

You may want to include outstanding debt in your new mortgage—for example, by paying off your high APR credit cards. By consolidating these debts in the amount refinanced with your mortgage, you could make just one payment each month. Not only will you feel more organized and in control of your finances, but you may be able to save significantly on interest charges and late fees.

The average American household has $8,000 in credit card debt. If you were to consolidate this amount when refinancing, you could save hundreds of dollars in high credit card APRs.

Almost all of the reasons to refinance will put extra cash in your pocket, but the decision to refinance will depend on a few points about your financial situation and future plans. Call an Allpointe Mortgage Advisor at 866-255-3535 to start your refinancing process today.