When Is It a Good Time to Refinance Your Home?

As a homeowner, you may consider refinancing your Florida home loans at some point. Refinancing involves obtaining a new loan to replace your old one. There are several reasons why people choose to refinance their homes. A few include:

  • Changing their loan terms
  • Decreasing their interest rates
  • Obtaining cash from the equity they’ve built up in their house

However, with mortgage interest rates rising, it doesn’t always make sense to refinance your house. Let’s look at some scenarios in today’s environment where refinancing makes sense:

Reducing Your Monthly Payment

Depending on the terms of your current mortgage, it may make sense to refinance. With the rising cost of living and inflation at an all-time high, reducing the size of your monthly mortgage payment can be a huge benefit and provide a little more leeway to meet basic expenses. 

For example, if your current mortgage has a 15-year term, you may choose to refinance it under a 30-year term. This approach may lead to lower monthly mortgage payments, depending on your current interest rate and the interest rate you can obtain in today’s market. 

Lowering Interest Costs

In some cases, you may be paying a significant amount of interest on your mortgage. This scenario is particularly likely if your original mortgage loan had a high interest rate due to your credit score at the time or if you selected a 30-year mortgage. 

You may be able to lower the amount of interest that you pay towards your mortgage through refinancing if you reduce the length of time on your loan or are able to obtain a decreased interest rate. 

Changing the Rate Type of Your Mortgage

If you’re currently under an adjustable-rate mortgage, it may make sense to move to a fixed rate option, especially with today’s increasing interest rates. 

No one can be sure if rates will continue to increase over an extended period, and with rising costs of living, you want to make sure you have enough income to regularly cover your mortgage payment. 

Those who are concerned about making ends meet should their adjustable-rate mortgage continue to rise should definitely consider refinancing.

Withdrawing Cash from Your Home’s Equity

With home prices on the rise, many homeowners have found themselves with significant levels of equity available for their use. A cash-out refinance can allow you to withdraw money from your usable equity and use it for potentially any purpose. 

Frequently, people use cash-out refinancing to pay for renovations to their house or significant expenses such as college tuition for their children. If you find that you could benefit from having additional cash available to use, a cash-out refinance might be a good option for you.

Removing Private Mortgage Insurance

If you have a low loan-to-value (LTV) ratio, you may be able to remove previously required private mortgage insurance (PMI) by refinancing. PMI may be anywhere from 0.4% to 2.25% of your home’s total purchase price, which can increase a monthly mortgage payment by quite a bit.

An LTV of 80% or lower — which means that the owner of the property has accumulated at least 20% of the value of the home in equity — may allow for the removal of PMI. This removal can reduce the size of your monthly mortgage payment. In some cases, this may be a savings of several hundred dollars each month. 

How Can Mortgage Lenders in Florida Help?

Working with a qualified mortgage lender in Florida can allow you to access the best refinancing options currently available. If you’re considering refinancing your home, it’s best to shop around to find deals that can potentially save you money. 

Disclaimer: The opinions expressed above are meant for illustrative purposes only. For specific questions about mortgages or your lending needs, please contact Arco Financial. www.arcofinancial.com. Some restrictions apply. NMLS # 2149692