A Lower Interest Rate Is Not the Only Way to Save on Mortgage Refinance

As U.S. interest rates remain elevated, homeowners may be wary of refinancing. However, mortgage finance remains a compelling and cost-effective choice. Often, the key is to look beyond the interest rate and consider the numerous benefits of refinancing.

There are often overlooked opportunities that can both save you money and optimize your finances. In fact, even when rates start to increase, you can still take advantage of refinancing options to save.

Consider these six reasons to refinance, which go beyond just obtaining a lower interest rate.

1. Get Cash at a Low Interest Rate

Home loans offer one of the lowest interest rates available. If you need cash and have equity in your home, it often makes sense to refinance your mortgage. When your home needs repairs or renovations, you might consider a personal loan or credit card, but they typically carry a high interest rate. A cash-out refinance can give you the money you need at a lower interest rate and with an extended repayment period.

Benefits:

• Finance home repairs and upgrades at a low interest rate.

• Keep the convenience of a single monthly payment.

2. Consolidate High-Interest Debt

Speaking of high interest, you can also use the cash from a refinance to immediately pay off credit card balances and consolidate your debt into one monthly mortgage payment. This improves your budget by reducing your total monthly payments so you can start focusing on additional financial goals.

Benefits:

• Use low-interest cash to pay off your high-interest debt.

• Free up money to add to savings and investment accounts.

3. Lower Your Monthly Payment

There are times when a lower monthly mortgage payment can make it easier to meet your monthly budget goals. If a few years have passed since you signed your last loan documents, it’s possible you can lower your monthly payment by refinancing to another 30-year mortgage, even at a slightly higher rate. The extra money in your budget could be used for other things, including paying off high-interest debt, taking on a car payment, or saving for a large purchase.

Benefits:

• Decrease your monthly mortgage payment.

• Add more flexibility to your monthly budget.

4. Remove the Costly Expense of PMI

Private mortgage insurance (PMI) is an expense many homeowners look forward to eliminating. It’s a cost incurred by many when they don’t make a 20% down payment on their home. PMI can add hundreds of dollars to your monthly mortgage payment. You can refinance to eliminate PMI when your home value increases, and your equity rises above 20%.

Benefits:

• Eliminate the expense of PMI.

• Reduce your mortgage payment.

5. Lock in a Fixed Rate and a Stable Payment

If you have an adjustable-rate mortgage, it may be a good time to refinance to a fixed-rate mortgage. When the interest rate on your mortgage is fixed, you don’t have to worry about a higher rate and a larger monthly payment down the road. Your decision to move to a fixed rate could depend on how close you are to a rate adjustment and how long you plan to stay in your home.

Benefits:

• Lock in a low rate for the life of your loan.

• Eliminate the chance of a higher mortgage payment in the future.

6. Recapture Cash You Used for a Down Payment

As home values increase, so does your accrued home equity. This allows you to refinance your mortgage to reclaim the money you used for the initial down payment. You can add the recaptured cash back to its original account. Or you can use it to fund investments or to tackle other financial goals.

Benefits:

• Funnel money back into deposit or investment accounts.

• Use low-interest cash to buy additional real estate or other investments.

Calculate Your Potential Savings

Before deciding on refinancing, it's essential to understand the potential financial outcome. Our Mortgage Refinance Calculator provides an easy way to estimate your new monthly payment, potential savings, and how long it might take to break even on the closing costs of a refinance. Using this tool, you can make a more informed decision about whether mortgage refinancing is right for you.

It’s true that securing a lower interest rate is a popular reason to refinance your existing mortgage, but a refi can also help you save in many other ways! A cash-out refinance at a low interest rate can allow you to pay for repairs or upgrades to your home or pay off high-interest debt. Refinancing to get a lower monthly payment can prevent you from taking on debt at a higher interest rate. When you’ve built up enough equity in your home, a refinance can also eliminate the costly expense of PMI. And with interest rates this low, you may want to switch to a fixed-rate mortgage to avoid higher monthly payments in the future.

Axos Bank is here to help refinance your mortgage. Our mortgage consultants specialize in reviewing your complete financial picture to see how we can help you optimize your footing. If you’d like to learn more about refinancing your mortgage, call 888-546-2634 to speak with an experienced Axos Mortgage Consultant today.