Understanding the importance of a mortgage refinance in today’s financial climate is critical. As the markets and the economy stabilize and begin to grow, people can expect a rise in interest rates. Eventually, the low rates that are associated with the downturn will be long gone, and the feasibility of refinancing will go along with it. Before the downturn, an interest of eight percent would have been considered a great rate. This means that interest rates have the potential to double or triple in the next few years as the economy begins to expand to a robust pre-recession level. Higher interest rates benefit savings and investments other than real estate, so the money saved in refinancing will grow better in those places rather than lying stagnant as equity is slowly rising home values.
However, there are many more reasons that a homeowner can benefit beyond simply being able to lock in or take advantage of the current low-interest rates. One such benefit is possibly lowering the term of the loan. This is prudent for those that have loan terms of 30 years. It may be as cheap at this point to have a 15-year loan at approximately the same rates. These savings can equal tens of thousands by the end of the shorter loan term and highlights the importance of a mortgage refinance.
Additionally, refinancing at a lower rate can provide substantially lower monthly payments. This can be lifting a significant burden depending upon the type of mortgage for most borrowers. However, this could also be utilized when paying for college or buying a car because the lower rate provides more monthly income to the homeowner.
Refinancing to access the home’s equity could also be utilized to this end. This decision should not be taken lightly, and the debt must be handled responsibly, but the money may be able to grow more swiftly in other ventures. It is a great opportunity to invest in one’s self in worthwhile endeavors like education or starting a business.