It’s more than likely you or someone you know has refinanced a home on Long Island. A refinance—replacing your current mortgage with a new loan at a better interest rate and term—can provide significant financial benefits. While it’s important to carefully consider all your options before making such a decision, you also want to seize the opportunity while interest rates are still relatively low.
Here are five reasons to refinance your Long Island home now:
- 1. It could potentially save you thousands of dollars.
By refinancing from a 30-year mortgage to a 15-year loan, you will not only pay off your debt sooner, but end up paying less in interest, as the rates are typically lower. According to the Federal Home Loan Mortgage Corporation—the government-backed enterprise also known as Freddie Mac—a 30-year fixed-rate loan averaged 4.02 percent in the first week of May 2017. However, the 15-year fixed-rate loan for that same period averaged 3.27 percent. Over time, this will result in substantial savings.
- 2. It could help those who are planning to move.
If you are planning to move within the next few years, refinancing with a 5/1 or 7/1 adjustable-rate mortgage loan could make a big difference to your finances. A 5/1 loan refers to a type of mortgage that starts out with a fixed interest rate, which is typically lower than a conventional 15- or 30-year loan for the first five years, and subsequently changes to a one-year adjustable-rate loan. A 7/1 loan is very similar—the only difference is the fixed interest rate doesn’t change for the first seven years.
Since you’ll most likely be paying less those first few years, those who want to move to a larger home to accommodate their growing family, for instance, may be better off obtaining this type of mortgage than a 15- or a 30-year loan.
- 3. It may also benefit those who don’t plan on moving in the foreseeable future.
On the other hand, if you plan on staying put for a while, refinancing could be a smart financial decision, too. When refinancing from an adjustable-rate loan to a fixed-rate loan, you’ll be able to lock in today’s low interest rate for the entire life of your loan, rather than risking potentially dramatic future fluctuations.
- 4. It may help you pay off other debts, too.
Being in debt is like shouldering a tremendous weight; it’s painfully holding you down. With a cash-out refinance—whereby you refinance your home for more money than you owe on your current mortgage—you will have extra funds to pay off old debt. This includes outstanding student loans or credit card bills. Not only will it feel good to make those final payments, but eliminating debt can also help improve your credit score. This means that new car you’ve been saving for might finally be within reach!
Here are a few other things you could do to positively affect your credit score.
- 5. It could help you invest in your future.
If you aren’t being held back by a significant amount of debt, getting a cash-out refinance could help you purchase another property, or even start your own business, as you will have additional capital to use as you see fit.
Refinancing your Long Island home can be a lengthy process, and closing costs can be significant. But over the life of the loan, refinancing to a lower interest rate or to consolidate debt can be a smart financial move. Before deciding, contact a trusted mortgage lender who will be able to answer any questions you may have in order for you to be sure of your decision. This includes what you should consider before refinancing, what you will need to qualify for a home refinance, and what a CEMA mortgage is. Remember, while there are many reasons to make this financial move, it’s not for everyone. So getting an expert’s advice is crucial.