To refinance or not to refinance? There is no single answer to that question because every homeowner’s ‘is it worth it?’ is unique. With historically low interest rates in 2020, and the Federal Reserves planning to keep them low through 2023, refinancing could be a smart move depending on your situation. Here are three of the common reasons homeowners choose to refinance.
Reason No. 1: You have an adjustable-rate that is about to reset.
Initially, Adjustable-Rate Mortgages, or ARMs, are alluring to borrowers as they offer low, fixed introductory rates. But eventually, the word “adjustable” hits home and borrowers realize those introductory rates may not last. If the fixed-rate period for an ARM is about to adjust, refinancing into a new fixed-rate mortgage may be the solution.
Reason No. 2: You want to pay your mortgage off sooner.
For borrowers whose goal is to pay their home loan off sooner rather than later, and don’t mind a higher monthly payment, refinancing to a shorter-term loan like a 15-year fixed-rate can help them become mortgage-free faster. This could also save owners a significant amount of money on interest in the long term.
Reason No. 3: You want to lower your monthly payment.
For payment-conscious borrowers, refinancing to a lower interest rate so they can lower their monthly mortgage payment is their ‘worth it’. However, refinancing may not always be the best choice for everyone, and some programs work better than others. For homeowners with FHA, VA and USDA loans, a Streamline Refinance is a faster, less complicated way to refinance government-backed mortgages and get a lower interest rate and more relaxed eligibility requirements.
Refinancing may or may not offer advantages for Texas borrowers, depending on their scenario and goals. A reputable mortgage advisor or broker can help guide borrowers to make the determination if refinancing is the best solution, and if so, help them find the best refinancing program for their situation.