When you obtain a new mortgage to pay off your current one, it’s called refinancing. There are several reasons to consider a refinance:
Improve your interest rate or payment
If your credit score has improved, or the market’s interest rates have dropped, refinancing could save you hundreds of dollars a year!
Change the term
If you would like to have your mortgage paid off sooner, refinancing may be a good option. If you are in a 10- or 15-year loan, and the aggressive payment doesn’t fit your monthly budget at this time, a refinance into a 20- or 30-year loan may be best.
Change the loan type/eliminate monthly mortgage insurance
Over the past 10 years, the real estate market has continued to improve. Home appreciation and competitive mortgage insurance (MI) options have made monthly MI reduction and elimination possible. It’s often possible to eliminate monthly MI without having 20% equity in the home.
There are several reasons to consider a cash-out refinance: debt consolidation, home improvements, padding a savings account, or down payment for other real estate purchases.