Why Right Now is the Perfect Time to Refinance Your Home
If you are like most people, chances are that your mortgage is the biggest part of your finances. It’s probably one of your biggest expenses that each month and it’s also one of the most critical ways that you are building wealth (through your home equity). However, if you signed your mortgage 5, 10, or 20 years ago then you are most likely overpaying. So why refinance?
Despite 2020 being a very rocky year all around, it was actually a very good year for mortgage rates. The silver lining in a tough year is that you will likely be able to get a much better deal on your mortgage if you refinance.
Why do people refinance?
If you’re not familiar, refinancing a mortgage is simply redefining the terms of your existing loan or coming up with a new one entirely. This is actually incredibly common since you, your lender, and the economy are constantly changing. As situations change, so can your mortgage.
There are plenty of reasons to consider refinancing your home. Here are a few of the most popular:
- Securing a lower interest rate – This will save you tons of money over the long run.
- Shortening the length of your mortgage – If interest rates drop, it’s possible that you could negotiate a mortgage where you pay roughly the same each month but pay down your home significantly quicker.
- Convert from an adjustable-rate mortgage to a fixed-rate one (or vice versa).
- Cash out – Use the money to pay off high-interest debt such as credit cards or make home improvements.
Regardless of your reasoning, right now (January 2021) is undoubtedly a good time to refinance your home in Maine. Let’s take a look at why that is.
Interest rates are at record lows
This is a phrase that you might hear on the news sometimes but maybe aren’t quite clear how it impacts you. This is what “low interest rates” means:
The Federal Reserve (the central bank of the United States) establishes an interest rate that determines how much banks can charge to borrow/lend money to each other. This interest rate is always fluctuating based on new updates in the economy. When the Fed lowers interest rates, it means that consumers (like yourself) will be able to borrow money more cheaply.
If you signed a mortgage 10 years ago when the interest rate was higher then you are probably paying much more than you would if you signed a new mortgage today. If this is the case, it makes a lot of sense to refinance your existing mortgage and take advantage of that lower rate because you could save lots of money or be able to pay down your mortgage more quickly.
For most of 2020, interest rates have been dropping significantly. Despite rising slightly in the beginning of 2021 interest rates are expected to hover around 3% for the majority of 2021. This is incredibly low and means that it is a great time to consider refinancing your home.
We hope that you have found this article valuable when it comes to understanding why this is the perfect time to refinance your home. If you are interested in lowering your interest rate and monthly payment, please check out our refinancing page.