Do you remember when you first received the keys to your new home? Walking through the front door filled you with excitement and anticipation.
Your life has probably changed quite a bit since that day. Marriage, a new career, additional family members, and other life experiences have likely affected your finances in ways you hadn’t expected.
While the passing years have brought changes to your household income and expenses, there have also been changes in the national economic landscape. Interest rates are historically low, and it’s possible to take advantage and refinance your home mortgage to improve your personal finances.
A home loan refinance allows you to use a new loan to pay off your existing loan. The new loan is intended to help you achieve a specific financial goal. Saving money is the most common goal and can often be accomplished by obtaining a new mortgage loan with a lower interest rate or different repayment terms. Homeowners might also experience benefits by changing from a variable interest rate loan to a fixed interest rate loan, or vice versa.
Curious if refinancing will improve your financial situation? Whether you’re looking to lower your payment, pay your loan off earlier or save on interest, there are many ways a home loan refinance can help you achieve your financial goals.
Homeowners who refinance their mortgage can:
Reduce monthly mortgage payments. The lower your monthly expenses, the better your cash flow and the less strain on your finances. A new loan with an extended repayment period, such as changing a 15-year loan to a 30-year loan, can result in smaller mortgage payments. Remember that a longer term may mean more interest paid over the life of the loan. A mortgage refinancing calculator can help estimate your interest and payment with a new loan.
Own your home free and clear – sooner. Maybe your financial goal isn’t a lower payment, but to be completely debt-free. Going from a 30-year loan to a 15-year loan can eliminate a monthly mortgage payment from your expenses sooner. Without a mortgage payment, you’re free to work on other financial goals such as an earlier retirement.
Use improved credit scores to your advantage. It’s possible your credit score has increased since you first closed on your home loan, since credit scores change based on activity. Making on-time payments to your creditors and keeping account balances low have the most significant influence on your score. If you’ve experienced an uptick in your credit score, that may lead to a better interest rate and/or more favorable repayment terms on a new loan.
Use the cash back for other financial goals. Excess funds received during a home loan refinance can be used to pay off high credit card debt, private student loans, or other personal debt. This can translate into substantial interest savings. It’s also possible to use the excess funds for investments, starting a business, or to meet other money milestones as part of a larger financial plan.
Secure a predictable monthly payment. While adjustable-rate mortgages have their benefits, it also means your mortgage payment varies over time. Switching to a fixed-rate loan can bring predictability to your finances since the mortgage payment will remain the same throughout the repayment term. This may be especially worth exploring while rates are lower than typically seen in the industry.
Would you benefit from a refinance or is your current loan the best situation for you? Our experienced lenders are ready to help you evaluate the benefits of refinancing by comparing your current loan with a range of mortgage options available. We can help find the right mortgage loan based on your financial goals. Let The Bank of Missouri be your mortgage partner as you refinance your existing mortgage.