When it comes to refinancing a mortgage there are multiple factors that can make it beneficial to do so. Of course, in the current marketplace with interest rates at record lows, the first reason to refinance is most always a lower interest rate. However, there are other reasons as well that make sense to refinance and today we will discuss some of these reasons.
The first reason to refinance is to get a lower interest rate on your mortgage. Even with the downturn in interest rates, there are still many homeowners who have not refinanced.
Of course, many borrowers would like to refinance, but can’t because they have little or no equity due to falling home values.
However, for those with some equity, that have not taken advantage of or are unaware of how low current interest rates are then this is the first reason to look into a refinance in the current marketplace.
The second reason to refinance is to move to a more stable fixed rate loan from an adjustable rate loan. In this regard, many borrowers do have low interest rate loans, but those rates are not long term fixed rates, but rather adjustable rate mortgage rates that will sooner or later adjust and will do so upward when rates inevitably rise again. For these borrowers a fixed rate, even if it is not tremendously lower makes sense over the long term.
Even more so, there are borrowers who do not plan on staying in a home long term, but with adjustable rate mortgages in the current market also being extremely low it even makes sense for the borrower who is only going to spend five more years in a home to refinance into for instance a new five year fixed rate mortgage. Over those five years the savings can still be enough to justify the process of a refinance.
Yet still, another reason that many homeowners may refinance in the current market, is if their home is currently paid off. While a paid off home is not necessarily a bad thing, in the current market with very low long term interest rates, many borrowers are now taking advantage of this fact and cashing out there homes. They are using the money for investment in another property, a business or a multitude of other investments. This is because once again home equity is one of the least expensive long term sources of money in the current marketplace.
On the other hand for even those that do not necessarily have a home completely paid off, but still do have equity in their homes, a cash out refinance can also make sense when it is used to pay off debt or for certain investments as well.
Cash out refinances were in vogue as property values rose during the real estate boom of the early 2000’s, but for certain borrowers who still have equity in their homes, cash out refinances with rates at record lows, still make sense.
Finally, yet another reason to refinance would be to combine two existing loans into a single home loan on the property. Many homeowners who have second mortgages have either non-fixed rate home equity loans or higher interest rate fixed loans and thus it makes sense to combine both loans into one lower fixed rate loan.
Of course, this will require that a borrower not be upside in their home, as is the case with many homeowners, but combining two loans into one makes a lot of sense in the current marketplace as well.
These are just some of many reasons to refinance in the current marketplace and if you fall into any of the above scenarios it may be time to look at refinancing your current home loan.
I hope the foregoing information helps you in the decision of whether or not to refinance your Tucson Real Estate.