In Home Loans

Homeowners choose to refinance their mortgages for all kinds of reasons, but when is the right time to do so? Take a look at these signs that a refinance may benefit you.

Your Interest Rate is 4% or Higher
Interest rates are currently extremely low, but that hasn’t always been the case. In fact, just a few years ago, the average interest rate for a 30-year mortgage was between about 4 and 4.5%, according to, a financial information publisher. While average rates this year have been lower than that, there’s no telling when they’ll increase again, making now the perfect time to get a better rate.

You Want to Shorten Your Mortgage Term
With a refinance, you could shorten your mortgage term, allowing you to save significantly over the life of your loan. With a shorter term, more of your monthly payments will be applied toward principal, and less toward interest. A shorter term may mean that your monthly payments will increase, but at the same time, you’ll increase your home’s value by building equity faster. That’s kind of like paying money to yourself.

Your Property Value Has Increased
As your property value goes up, your LTV, or loan-to-value ratio, goes down. Simply put, the LTV is the value of your home compared to how much you still owe on your mortgage. The difference between the two is your equity. As your home’s value goes up, so does your equity.

If the down payment you made for your house was less than 20%, chances are you’re paying mortgage insurance each month. But once you have at least 20% equity in your home, refinancing may allow you to use your home’s increased value to eliminate mortgage insurance altogether.

You Need Cash
With a cash-out refinance, you can use your home’s equity for cash. You get to keep the difference between the old and new mortgages, which is given to you in the form of a check. Popular reasons that some homeowners decide on cash-out refinances include to help pay for their child’s college tuition, to help pay off other debts and to pay for home renovations.

You Have an Adjustable-Rate Mortgage
An adjustable-rate mortgage (ARM) is an alternative to a fixed-rate home loan, and it comes with many benefits. Adjustable-rate mortgage borrowers usually get low interest rates and monthly payments for an initial period of time, or an introductory period. But at the end of that timeframe, the rate and payments can go up as the interest rate resets. With a refinance, you could switch to a fixed-rate mortgage and get a low rate that won’t increase.

PrimeLending is committed to helping you navigate each and every step of the mortgage process. If you’d like to learn more about refinancing, get in touch with one of our qualified home loan specialists today.

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