During the term of your mortgage, you may want to refinance to meet a variety of personal and financial goals. Refinancing will completely replace your current mortgage loan, providing you with new terms, rate and monthly payment.
Borrowers often refinance to:
Secure a lower interest rate. If interest rates are lower than when you received your current mortgage, you could reduce your monthly payments and the total amount of interest that you pay over the life of the loan by refinancing at a lower rate. When considering this option, you will want to take into account how long it would take you to recapture all of the costs of refinancing through savings from the new mortgage payment.
Convert from one type of mortgage to another. If your current mortgage is no longer the right fit, refinancing can help you obtain a different loan type. For example, if you currently have an adjustable-rate mortgage and seek the security of a set interest rate and stable monthly payment, you could change to a fixed-rate mortgage.
Build equity faster. If your financial situation has improved since you bought your home, you may want to secure a mortgage with a shorter term. Your monthly payments will most likely be higher, but this will help you own your home sooner and pay less in total interest charges.
Avoid foreclosure. If you are current on your mortgage payments but unable to refinance because you have little or no equity in the home, you may be able to refinance to a lower or more stable rate through a Home Affordable Refinance Program.