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Top 3 Reasons to Refinance a Mortgage
1. Lower your monthly payments

Probably the most common reason for refinancing is to lower your monthly
payments in order to ensure that each payment can be made.

There are various ways to lower your payments. One way to do so would
be to increase your loan term in order to pay less for an extended period of time.

If you have an FRM and feel that you can't afford your current payments on the
short term, but believe you will be able to deal with an increased rate later on, you
might want to consider switching to an ARM because its rates will be fixed at a
lower rate for a short period of time and then adjust later on when you know you
can afford it. Conversely, if you have an ARM it would make sense to switch to
an FRM with lower rates.

2. Decrease loan term

Does refinancing mean I have to extend the term of my loan? The answer is no,
and many people choose to refinance primarily for that reason of decreasing the
loan term while slightly increasing monthly payments. In the long term this probably
will save them a lot of money thanks to a lower interest rate. They will also finish
paying off the loan a lot sooner.

3. Cash-out refinancing

Many times there are other important debts people have to pay off or will need to
pay off in the near future. Refinancing for more than you currently owe will allow
you to receive a large amount of money to pay for these investments, whether it be
for college, home improvement, or buying a car. Many times people can do so while
getting a lower interest rate. As explained by the mortgage professor, this option
should be carefully weighed against taking out a second mortgage.
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