Today’s interest rates are nearing historic lows. If you currently have a mortgage with a higher interest rate, you could free up money in your budget and pay off your home faster with a home refinance.
A mortgage refinance essentially replaces your home loan with a new one. Depending on your needs, you can use a home refinance to cut monthly payments, reduce your interest rate or tap into your home equity to cover major expenses.
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Should you get a home refinance?
Many homeowners choose to refinance their home mortgage for different reasons. Potential benefits of refinancing your mortgage include the following:
- Reduce monthly payments: If you need to free up money in your monthly budget, you can refinance to a mortgage with a lower interest rate. You can also extend the length of time you have to pay off your home, extending from a 15-year
term to a 30, for example. By lowering your monthly payments with a home refinance, it might be easier to consistently make payments on time, potentially improving your credit score.
- Switch to a fixed rate loan: If your current loan has an adjustable rate, you could switch to a fixed rate to ensure stability and potentially lower your current interest rate. By refinancing your mortgage and switching to a fixed
rate loan, you’ll be insulated from sudden payment increases if interest rates spike.
- Pay off your loan faster: You can reduce the amount of interest you pay over the life of your loan by refinancing your mortgage from a 30-year to a 15-year loan. By doing so, you’ll also drastically increase the rate at which
you build equity. Depending on the specific terms of your mortgage refinance, you could also increase the rate at which you pay off your home loan.
- Tap into equity: A cash-out mortgage refinance replaces your existing mortgage with a new loan that’s larger than what you currently owe on your house. Unlike a regular home refinance, a cash-out refinance gives you additional
cash that you can use to spend on other expenses, such as debt consolidation and home improvements. It also gives you a new interest rate. To qualify for a cash-out mortgage refinance, you need to have a substantial amount of equity built up in
your home. Depending on your circumstances, refinancing your mortgage with this one-time cash payment might be a good option.
Contact a lending expert to learn more or apply to refinance your home mortgage today.
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