There can be many sound reasons to refinance your home loan, but replacing an adjustable rate loan with a fixed rate loan is one of the most common.
While we are in a low interest rate environment the opportunity may exist to lock in a fixed principal and interest payment for the life of your loan. Taking this step can provide financial certainty and peace of mind regardless of likely rate increases in the future. Our Nation’s Central Bank has maintained a policy of keeping interest rates artificially low for an extended period of time. As the general economy and housing markets continue to recover, history teaches us that rates will be moving higher. You can protect yourself against higher housing costs in the future by refinancing before it is too late!
Below are the key considerations we will help you thoroughly understand your opportunity.
Potential benefit of a fixed-rate loan
Stability is the key factor, making it easier to maintain a budget so you can reach all of your financial goals. It is likely that your Adjustable-rate loan’s monthly payment will increase as the economy and housing markets continue to show improvement. Eliminating this risk from your financial horizon could be one of the most important financial decisions you can make in your life time. With a fixed-rate loan, when market interest rates go up, your principal and interest payments won’t. Adding this security to your financial future can be a great move!
Fixed-rate loan considerations
When considering this process it is extremely important to consult a Mortgage Professional. The current terms of your Mortgage must be carefully evaluated in comparison to your refinancing options. Both immediate and long term impacts must be carefully and thoughtfully explained to you. A complete understanding of all your financial goals and your life plan should be central to the recommendations you receive from your Mortgage Professional.
Obtaining a new loan is not free, as with any Mortgage Transaction, there are closing costs. When a lender advertises “no out of pocket costs”, this just means that the closing costs are added to your new loan balance or you are being credited these amounts through the use of a higher interest rate on the new note. A combination of these two elements may also be used to pay closing costs. How your closing costs are being paid and their financial impact on the benefits of your refinance transaction must be disclosed and thoroughly explained by your Mortgage Professional.
Addressing your other goals
In addition to securing the stability that a Fixed Rate Loan offers, you may have other financial objectives that can also be accomplished through the refinancing process. For example, you may not want to extend the term of your existing Adjustable Rate loan so new terms shorter than 30 years are an option.
Selecting a new loan term that is longer than your current note’s pay off date may increase monthly cash flow in support of your other financial goals. If you and your property qualify, it may be possible to tap into the equity in your home through a lump sum cash out transaction or by adding a Home Equity Line of Credit (HELOC).
With all of these considerations the most important first step is a consultation with a Mortgage Professional. This will give you the answers you need to determine if Refinancing your current Mortgage will help meet your financial goals and life plan!