Get a Lower Monthly Payment with the Help of Mortgage Refinancing
There are many reasons why a homeowner might want to refinance their mortgage. Some are seeking lower interest rates, while others might want to change the length of their term. One of the most common motivations behind mortgage refinancing, however, is to take advantage of a lower monthly payment. Here's what you need to know about lowering your monthly mortgage payment by refinancing your mortgage.
What is Mortgage Refinancing?
When you refinance your mortgage, you are essentially replacing your original home loan with a new one carrying a more favourable interest rate and/or a shorter term. Not only does mortgage refinancing lower your monthly payment, but it can also allow you to tap into your home's equity and convert it to cash that can be used for home improvements, to pay off debt, or make a down payment on a second home.
How Does Mortgage Refinancing Lower Your Monthly Payment?
First mortgages typically have 15 or 20-year terms. While these terms are advantageous in that your home will be paid off faster, you'll be saddled with hefty monthly payments for the duration of the term. This is where mortgage refinancing comes in. Refinancing allows you to stretch your payments over a longer period – say, 30 years. In doing so, you lower your monthly payments.
What Are the Advantages and Disadvantages of Mortgage Refinancing?
The most obvious benefits of refinancing a mortgage are lower monthly payments, interest rate reduction, payoff acceleration, and being able to convert adjustable terms to fixed terms. Depending on your circumstances, however, refinancing may involve some compromise. For one, there are extra fees involved in obtaining a lower interest rate, which may defeat the purpose of refinancing. Another important consideration is that by extending your mortgage term, you may end up paying more interest over the long run.
Be Confident in Your Choice
Still wondering whether refinancing is the right choice for you? We can help. Contact us to discuss your financial goals and learn more about the benefits of mortgage refinancing.