After the Federal Reserve cut interest rates in October for the third time this year, the option to refinance home mortgages became more attractive. However, low interest rates do not always mean refinancing will be in your best interest. If you’re thinking about this financial move, keep the following points in mind.
Get a Better Rate
When interest rates are cut, there is no guarantee the new rate will be better than what you already have. If you can benefit from paying less per month on your mortgage, then it could make sense to refinance. Currently, interest rates are at 3.72 percent. If this amount is less than your current rate, look into refinancing options with a mortgage specialist.
Changing Loan Terms
The amount you pay on a home loan is not the only factor. When interest rates go down, many homeowners rework their loan terms to put themselves in a better financial situation. Changing from a 30-year loan to a 15-year loan or getting a better deal when your introductory rate is nearing the end are two scenarios where refinancing makes sense.
Cash-Out Refinancing
If you’re about to take on debt, such as college tuition or buying a new car, refinancing at a lower interest rate may be a good idea. Some homeowners use this situation to borrow money against their loan at the lower rate to make payments on other investments. Although this option seems attractive, it’s strongly recommended you speak with a financial planner before borrowing more money than you owe on your home.
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