Moving from a 30 Year Fixed to a 15 Year Fixed could be one of the best financial decisions. Even if you have a rate which is below the current market rates, moving to a 15 Year Fixed can save you hundreds or thousands of dollars. However, you should qualify and should be comfortable with a higher payment.
Sometimes, it’s the other way around. You got into a short-term mortgage to save on interest cost. But because of changed circumstances, you cannot service the steep payments. In that case moving from a 15 Year Fixed to a longer term like 20, 25 or 30 Year mortgage may be a better idea. You will save on your monthly payment and get the breathing room that you are looking for.
If you have had an Adjustable Rate Mortgage (ARM) and are getting worried about the future rise in rates, moving to a Fixed-rate mortgage (FRM) may be a good idea. This is recommended if you plan to keep the mortgage for a very long time. Since the FRM rate are at a very low level, locking in a low fixed rate for the life of the loan gives you the peace of mind.
If your ARM loan is nearing the adjustment period and you are not planning to keep the loan for a long time, moving into another ARM will save you on interest cost. With 5 and 7 Year ARM pricing at least 1% lower than the fixed rate, it makes sense to save on monthly payment and interest cost by moving to an ARM from another ARM.
May be your home prices have gone up or you have paid down enough on your principal or it’s a combination of both.You may now have 20% equity in the house or you can bring in some cash to do that, then– it’s time to get rid of the pesky mortgage insurance.
If you have big expenses or major purchases, doing a cash-out refinance may be a great idea. You will however need lot of equity and cash-out refinance will have a rate higher than a regular refinance, but it may still be a much less expensive than borrowing from some where else or breaking into your retirement nest.