Why would you refinance your Jersey Shore home mortgage at this time? For many reasons. Refinancing now can allow you to:
1. Lock in a lower interest rate
2. Reduce your monthly mortgage payment
3. Extend (or reduce) your repayment time
4. Help you pay off high interest debts
5. Free up money for investments, home repairs, or making your home more energy efficient
Since interest rates hover around all-time lows, anyone carrying a higher rate interest loan or an ARM will benefit from refinancing; just a .5 or 1 point drop in rate constitutes worthwhile savings. Even if the ARM on your Jersey Shore home is lower than the current rate, when rates rise again, your costs will certainly go up, perhaps dramatically. Refinancing to a fixed-rate mortgage now allows you to lock in a low rate for the duration of your loan. Do be aware, though, that lenders generally charge a risk premium for fixed mortgages.
If you as a Jersey Shore home owner want to shorten the length of time required to pay off your loan, you may want to consider refinancing to a 15-year fixed-rate mortgage with even lower interest rates. This move will increase your monthly payment, but you may save hundreds of thousands of dollars in the long run.
While refinancing is a good way to free up cash and take advantage of the equity in your Jersey Shore home, be cautious in your use of the cash-out option. You want a loan that will let you borrow some, but not all, of your built-up equity. It often does make sound sense to pay off bills having a higher rate of interest than your refinanced loan or to make necessary home repairs, but be sure you don’t eliminate your equity altogether. If one of your goals is to make your home more energy efficient, you might investigate the FHA Energy Efficient Mortgage Loan program that is designed to help homeowners make energy efficient improvements as part of the refinancing.
As with any financial transaction, there are some negative possibilities associated with refinancing. You should know that most fixed-term mortgages contain a penalty clause for early payoff of the loan. Be aware, too, that refinancing involves closing and transaction fees which, in some cases, may outweigh the savings gained from refinancing, especially if you don’t stay in your refinanced Jersey Shore home long enough to cover those costs. Check with you financial advisors to determine if refinancing would benefit you.