Mortgage refinancing is the process of curating a new mortgage loan by modifying the terms and conditions of the current mortgage. Once the lender approves the mortgage refinancing application, you’ll have to abide by the latest terms and conditions in all your payments.

While refinancing may seem like a good idea, the decision is not to be taken lightly. 

If you choose to move forward with this process and refinance your mortgage, you’ll have to repay the fee and re-apply for mortgage approval. So make sure this is the right decision for your finances; do it at the right time to reap benefits like lower interest rates. 

To help you make the right decision, the experts at EasyMortgageLend.com have compiled a list of four factors that help explain why and when it makes sense to refinance your mortgage. 

Securing a Lower Interest Rate

The most common reason that homeowners opt for mortgage refinancing is to benefit from low-interest rates. This method is commonly referred to as “rate-and-term” refinancing. With this approach, you can lower the interest rate on your current home loan, particularly when the mortgage prices drop. 

Moreover, you can save a large sum of money if you shorten the repayment duration for the home loan. Short-term mortgages traditionally come with relatively lower interest rates, whereas long-term loans have higher interests. After all, there is a greater risk with long-term loans. 

Therefore, if you refinance the home mortgage when the interest rates are lower and decide to reduce the repayment duration, you can easily save a lot on interest payments and become debt-free more quickly. 

Building Home Equity

Home equity refers to a percentage share of your homeownership. It is the amount you have already paid off on your home relative to the amount paid by the lending institution. 

Now, how does home equity work? 

When you are ready to build equity on your home, all you have to do is repay the mortgage as quickly as possible. Your home equity increases when you pay off the loans faster or when you make your renovations to your home to increase its market value. 

If you decide to refinance your mortgage, you can build on your home equity by redefining the loan repayment period. A shorter loan term means your loan will be paid faster, thus allowing you to build home equity. 

Consolidating Your Debt

Debt consolidation is also possible with mortgage refinancing. If you have a sizeable high-interest debt, you can use cash-out refinancing to get a better cash flow and cut costs in the long run. With cash-out refinancing, you can access your home equity to consolidate debt. This depends on the amount of equity you decide to cash in on. This amount would subsequently increase your mortgage balance. 

However, if you are choosing this option, you need to make sure that the new terms of the loan repayment are within your budget. If you are unable to make regular payments, you could risk losing your home. 

Converting From Adjustable-Rate to Fixed-Rate Mortgage or Vice Versa

A fixed-rate mortgage requires you to pay a specific rate of interest that remains the same throughout the loan repayment duration. Conversely, an adjustable-rate mortgage initially has a lower interest rate than a fixed-rate mortgage, but the interest amount varies over time, depending on the market’s condition. 

Mortgage refinancing also helps with changing adjustable-rate mortgage to a fixed-rate mortgage, or vice versa. If your financial situation requires you to make this change, you can do so with mortgage refinancing. 

Learn More About Mortgage Refinancing

Mortgage refinancing can help you save long-term costs if you have a clear strategy for the process. However, if you are unsure about the decision, you can reach out to EasyMortgageLend.com and chat with our experts. Feel free to call us at (647) 895-3921  or fill out our contact form. Our agents will get in touch with you ASAP and direct you accordingly!