Lower your monthly payment. You can lower your monthly costs by stretching out your mortgage repayment over a longer term. Lowering your mortgage payment can also be achieved by dropping your interest rate. If that’s your goal, adjustable-rate mortgages (ARMs) could be the best fit for you. This product, however, does have pros and cons, so speaking with an expert is wise.
Trade home equity for cash. If you want cash to renovate your home, pay college tuition, consolidate debt, or for any other reason, home equity lines and cash-out refinances were made for you. Use a home equity loan if you like the mortgage you have, and the cash-out refinance if you don’t.
Lower your interest rate. Refinancing to a home loan with a lower mortgage rate can reduce your monthly payment and the amount of interest you pay. If you plan to keep your home for many years, consider a 15,20, or 30-year fixed rates; otherwise, you’ll find that ARMs and hybrid ARMs, which are fixed for 3-10 years before they begin adjusting, carry the lowest mortgage rates.
Pay your mortgage off faster. Switching to a 10 or 15-year mortgage, for example, could get you an interest rate about half a percent lower rate than on 30-year fixed-rate loans. Your home equity goes up and your interest expense goes down faster. The downside to this would be a higher mortgage payment; make sure you can afford it before committing to this loan.
Convert an ARM to a fixed-rate mortgage. If you plan to keep your home for a long time, taking a fixed loan with a higher rate than your current ARM may make sense in the long run. It keeps you safe from rising rates and makes budgeting easier.