Seeing the value of your property increase is a welcome development for homeowners. It can be reassuring evidence that the home they chose to purchase, and when they bought it, was a smart decision. Rising values can also be a signal that it’s time to explore refinancing your current mortgage.
Falling interest rates are the most common reason homeowners consider refinancing. The ability to lower your mortgage rate, particularly if you plan on staying put and have many years left before paying off the mortgage, is almost a no-brainer.
However, even if interest rates are the same or starting to rise, refinancing your mortgage could still be a wise move, especially if the value of your home has increased significantly since you purchased it.
If you bought your home with a minimal down payment, you’re likely paying for mortgage insurance in addition to repaying your loan. Now that your house is worth more, the mortgage insurance premium could be an unnecessary expense. If the current value of the home puts your equity at above 20 percent, refinancing could be a shortcut to saving hundreds of dollars per month.
Get Ahead Of Your ARM
If you are relying on an adjustable rate mortgage and nearing the end of your fixed-rate term, refinancing sooner rather than later could save you money. Since the adjustable rate mortgage (ARM) will eventually lock you into the interest rate of the moment, refinancing into a fixed-rate before it gets any higher will lower your rate over the life of your loan.
Put Your Equity Work
Of course, a jump in how much your home is worth, combined with refinancing, can also add cash flow to your budget. When used responsibly, the access to equity can be hugely helpful, and even provide a return in the future. Funding home improvement projects, paying off higher interest debt or using the cash for an unavoidable major purchase could make a cash-out refinance your best option.
If you think refinancing might be in your future, the experts at Open Mortgage are available to explore all the options available to you. Give me a call today!