Refinancing your mortgage is when you replace your existing mortgage agreement with a different one. While the most common reason to refinance your mortgage is to take advantage of significantly lower interest rates to lower your monthly payment, it’s not the only reason for refinance.
Some people refinance to access the equity in their home to provide flexibility to cover expenses, such as major home improvements, or to pay off higher-interest debt. It’s easier to qualify for the refinance if you have at least 20 percent equity in your home.
If refinancing is something you are interested in, start with a mortgage expert to see if it makes financial sense. Be sure you plan on owning the property long enough to break even on the closing costs of the refinance – that is the time it takes for the closing costs to be covered by the monthly savings.
If you have a credit score of 750 or more and a debt-to-income ratio of 36 percent or less, you will be more likely to get the lowest rates.
Making your money work for you is what refinancing is all about. It’s worth exploring to see if it makes sense for you, whether you want to lower your payments, pay off your mortgage sooner, or help fund a large expense like a home improvement project or retirement.
