Refinancing your home can save you a lot of money in the long run, but the choice to refinance depends on your situation and reasons for refinancing. In today’s blog post from K2 Lending, we’ll be sharing a few of the most common reasons people refinance their mortgages. Continue reading to learn more, and if you’re interested in refinancing or looking for a housing loan of any kind, contact us today!
Lower Interest Rate
Getting a lower interest rate is the primary reason that people refinance their homes. Refinancing when the loan interest rates hit a low will save you money on your monthly mortgage payment as well as the interest you pay over the lifetime of the loan.
However, a low rate today may be even lower tomorrow, so how do you know when to refinance? We suggest finding your “target rate” as well as a rate that you would regret choosing. Why? Because when people are looking to refinance, they often want to find “the best mortgage rate,” but don’t know what that is. Mortgage rates fluctuate, and it’s more about refinancing at a rate that you’re happy with rather than being dissatisfied that you missed the absolute “best” moment.
If you’re not happy with the refinance rate that a lender offers you, contact another mortgage company and compare. You can always shop around for a lender, and K2 Lending can help you find a mortgage rate that works for you.
Rising Home Equity
Depending on the type of home loan you have, rising equity can provide a good opportunity to refinance. For example, if you put down less than 20 percent on your home and have an FHA loan and your home equity rises, you may be able to refinance out of the FHA loan and into a conventional mortgage. This would allow you to get rid of your monthly insurance premiums. There are other ways to handle this situation, but it may be a good reason to refinance your home loan. Many of the states we serve, such as Colorado and California, are areas where home values have been appreciating the most, which means you could be at 20 percent equity already.
If you’ve accumulated a lot of high-interest debt, such as debt on credit cards or personal loans, a cash-out refinance may help you improve your cash flow and save you money in the long run. You can refinance your home and use the cash-out to pay off your high-interest loans. It can be a little risky to make this choice since you’re securing your unsecured credit card debt with your home, but for some, it may be a smart financial decision.
Reduce Your Loan Term
Often, a housing loan with a shorter term has a lower interest rate, so refinancing your loan to shorten the term can decrease the amount of money that you pay over the life of the loan. Your monthly payments will most likely increase, but you will save money over the course of the loan.
You can use a cash-out refinance to use however you like, such as make home improvements. When you decide to choose a cash-out refinance, you will often be refinancing for a larger sum than what you owe now, and your house will still be collateral for the bank. However, depending on the strength of your credit score, you may be able to qualify for up to 80 percent of the home’s loan to value.
K2 Lending – Housing Loans
K2 Lending allows you to shop 30 banks at once, giving you premier housing loans at your fingertips and helping you find mortgage rates that fit your needs. Our mortgage company is rooted in more than 50 years of combined experience, and we’re known for our dedication to custom-fitting mortgages for our clients. Whether that means refinancing, buying your first home, or buying your fourth, we’re here to make the process as smooth as possible. We pair you with a personal mortgage consultant who will work tirelessly to find a housing loan that’s a good fit for you long term. Our company is based in Denver, CO and we also serve Wyoming, Nevada, New Mexico, Texas, California, Oregon, Idaho, Michigan, Florida, Georgia, South Carolina, Virginia, and Montana. Get started today!