Refinancing your home can seem daunting; there may be a penalty to pay out early, and you’ve been working hard to reduce the amount you owe on your mortgage.
So why do it?
Whether you need cheap money for home renovations or are looking to take advantage of a better rate, there are many valid reasons to refinance.
- To get a lower rate. Depending on the term of your mortgage, it might make sense to refinance into an available lower interest rate immediately. Depending on the terms of your current mortgage, this may be advantageous.
- To consolidate debt. The amount of interest you pay on your mortgage is substantially less than what you pay on a credit card, line of credit or bank loan. So, if your home has equity available and you have debt, it just makes good sense to pay the lower interest rate instead of the higher rate.
- To complete renovations. To renovate your home, you’re going to need some money. Mortgage money is basically the cheapest available, especially with today’s historically-low interest rates. So if your home has equity available, this is a great option to make sure that you’re able to get the funds you need to make those home improvements.
- To get some seed money for investing. Like renovations, an investment requires some up-front money. Mortgage money is comparatively cheap to probable investment returns. It just makes sense.
- To get money for a big expense. While it’s perhaps not optimal, sometimes you need money for some unforeseen expense, and refinancing can be a good way to get access to those funds.
Refinancing depends on your available equity and the terms of your mortgage, but it can be a great option if you’re in need of additional funds.