What are the benefites of refinancing

When interest rates are low, you might consider refinancing your mortgage. Refinancing may allow you to replace your current loan with a new mortgage that has better terms. Here are some of the potential benefits of a refinance.

Increased cash flow

• Your loan’s monthly payment typically decreases with a lower mortgage interest rate.
• With a lower payment, you can use the extra funds for retirement savings, paying other debts, saving money for college, or other purposes.

Potential to switch to a different loan type

• If you have an adjustable-rate (ARM) or a balloon mortgage, reduced interest rates may make a fixed-rate mortgage more desirable, especially if you want the stability of an interest rate that does not change over time.
• If you have a long time left on your mortgage, lower interest rates may make it possible to switch to a shorter-term mortgage.
  • You can pay the principal balance down and build equity faster.
  • You may pay less interest over the life of the loan with a shorter term loan.
• If you have a jumbo loan, you may be able to refinance to a "blended jumbo" (Mortgage + Home Equity Financing). 

Opportunity to access the equity in your home

• While you’re lowering your interest rate, you may want to consider using the equity in your home to pay for major purchases or to make home improvements. This type of loan is known as a cash-out refinance.