Your mortgage can seem like a long term commitment – a financial obligation that stretches over many years, even a couple of decades. It may be a long term commitment but you’re not locked in. The economy and the interest rate changes and you build up equity in your home, so being able to adjust your mortgage allows you to optimize your mortgage for your needs. In this blog, I’ll explore the in’s and out’s of mortgage refinancing and why it might be a smart financial move.
Interest Rate Adjustment
The first reason that most people think about refinancing is because the mortgage interest rates have changed. If banks are offering a lower interest rate than what you committed to in your mortgage, it might make sense to refinance (and even pay a small penalty) to take advantage of that lower interest rate.
Tap into Equity
As you pay off your mortgage, and as home values increase in general (which they tend to do, although not always consistently), you build up equity in your home. You can access that value and borrow against it, usually through a home equity line of credit, which is a low-interest revolving loan. Use that money to pay down debts, fix up your home, reinvest in other things – whatever you need.
Mortgages are long term financial obligations… but refinancing makes it possible to adjust our course as necessary. In this short blog post we’ve only been able to cover the in’s and outs of mortgage refinancing and why homeowners love it. Adjusting your mortgage through refinancing allows you to pay less and to tap into the value that is building in your home. It can be a great idea! Talk to a lender or mortgage broker to see if it’s right for you.
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