Refinancing

Many people refinance to shorten their loan term to save on interest. For example, say you started with a 30-year loan but can now afford a higher mortgage payment. You might refinance to a 15-year term to get a better interest rate and pay less interest overall. You can also lengthen your loan term to lower your monthly payment.

Interest rates are always changing. If rates are better now than when you got your loan, refinancing might make sense for you. Lowering your interest rate can lower your monthly payment and you’ll pay less interest over the life of your loan.

There are many reasons a different type of loan may benefit you. Perhaps you originally got an adjustable-rate mortgage (ARM) to save on interest, but you’d like to refinance your ARM to a fixed-rate mortgage while rates are low. Maybe you finally have enough home equity to refinance your FHA loan to a conventional loan and stop paying for private mortgage insurance.

With a cash-out refinance, you borrow more than you owe on your home and pocket the difference as cash. If your home’s value has increased, you may have enough equity to take cash out for home improvement, debt consolidation or other expenses. Using cash from your home allows you to borrow money at a much lower interest rate than other loan types. A cash-out refinance can have tax implications, though.