Get a Better Mortgage by Refinancing

When you refinance your mortgage, you pay off your existing loan with a new loan that usually offers a better rate or a shorter term. This provides you savings over the life of the loan and can also provide immediate benefits to your current financial or personal situation.

How Can Refinancing Help?

Lower Interest Rates

Lower interest rates usually result in lower mortgage payments. That’s extra money in your pocket every month that can help you build savings, make investments or pay off other debt. Plus, you will pay less interest over the term of the loan.

Shorter Term

Moving to a shorter term (for example, moving from a 30-year to a 15-year loan) will pay off your mortgage sooner, which means you’ll pay less interest and build equity in your home more quickly. By getting a shorter term you may have a comparable or slightly higher monthly payment, even if your interest rate is reduced, but you’ll be increasing your net worth.

Moving from an Adjustable-Rate to a Fixed-Rate Loan

If you currently have an adjustable-rate mortgage (ARM), refinancing to a fixed-rate loan will ensure that your monthly payments remain the same over the life of the loan. You won’t be subject to the payment increases that can result from an ARM, stabilizing your monthly budget and helping with long-term financial planning.

When is the Right Time to Refinance?

Three factors should be considered when deciding to refinance:

Low interest rates – You should consider refinancing if you can qualify for an interest rate that is at least half a percent lower that your current loan. If the rate is more than a percent lower, the benefits are even greater. You could lower your monthly payment or have options to move to a shorter term without substantially increasing your mortgage payment. Either way, you will realize savings over the life of the loan.

Increase in your home’s value – If the home values in your local real estate market have increased, the equity in your home may have increased as well. A new loan with better terms may be available to you, or you can convert some of that equity into cash.

You’ve been in your current mortgage a short time – Much of your monthly payment is applied to interest in the early part of your mortgage. Refinancing may allow you to apply more of your payments toward the principal of the loan, which will help you build equity faster.

Contact one of our Mutual of Omaha Mortgage home loan experts today to determine if refinancing can help you meet your financial goals.

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