While it seems counter-intuitive to refinance your home loan in a rising rate environment, there are several scenarios where you might want to consider it. “There will always be a need for refinancing, regardless of current interest rates,” explained Joe LaGiglia, senior loan originator for Oak Leaf Community Mortgage. “Mortgage interest rates are still near all-time lows and are much, much lower than unsecured lending rates.” Here are three reasons to refinance your home loan in a rising rate environment.
1. Debt consolidation. “In addition to a mortgage, many people have debts that include car loans, student loans, and credit card debt,” LaGiglia said. “These interest rates are generally much higher than mortgage interest rates; credit card rates can exceed 20%! Consolidating your debt with paying off your mortgage can significantly reduce your overall interest costs.
2. Reduce the term of your current mortgage. “If you currently have a 30-year loan, you can reduce the term to 10 or 15 years and usually get a lower rate,” LaGiglia added. “Although your monthly payment will increase, you will pay significantly less interest over the life of the loan. Some customers can save hundreds of thousands of dollars with this option, and their house is paid off much sooner.
3. Leverage the equity in your home for other major expenses. “As home prices rise and homeowners enjoy greater equity in their homes, now is a great time to refinance,” LaGiglia said. “A cashed-in refi is a great way to pay for home improvements, college expenses, medical bills, or other costs associated with life events.”
Over the past half century, history has shown that inflation and the corresponding interest rates are cyclical and constantly changing. If you know you will eventually need to refinance, now is the best time to do so, with the possibility of refinancing again in the future if rates drop significantly. For more information contact:
Joseph La Giglia
Senior Mortgage Originator
NMLS ID: 703971