Should I Refi? The 3 Top Reasons Why You Should Refinance in Orange County

The idea of refinancing a mortgage is appealing to many Orange County homeowners, especially those who took out their loan when rates were much higher than what they are today. Thanks to some of the lowest mortgage rates in history, many people have been able to lower their monthly payments. 


But is refinancing now the right move? Take a look at why refinancing a mortgage now could be the best financial decision a homeowner makes.


Refinancing Has a Number of Benefits for Orange County Homeowners 


There are many benefits to refinancing a mortgage that homeowners can take advantage of, including the following:


  • Lowering their interest rate
  • Lowering their monthly payments
  • Decreasing the amount they pay over the life of the mortgage
  • Decreasing the time it takes to pay off their mortgage
  • Building equity more quickly
  • Changing from an adjustable-rate to a fixed-rate mortgage


The biggest reasons most homeowners refinance have to do with time and money. Determining the right time to refinance isn’t always easy, though.


What to Consider When You’re Ready to Refinance 


  1. Interest Rates Have Dropped


The biggest reason most people consider refinancing is that it allows them to lower their monthly payment by taking advantage of a lower interest rate. However, homeowners do have to carefully consider whether or not interest rates may decrease further.


While every homeowner will ultimately have to make their own decision whether to refi now or risk rates increasing, most experts say if a homeowner can lower their interest rate by 2%, it’s worth considering. Some even suggest a 1% cut makes refinancing an attractive option. 


  1. Homeowners Can Afford to Pay More on their Mortgage


This may sound counterintuitive—the point of refinancing, for many, is to lower their monthly payments. However, those who have increased their monthly income may want to look at refinancing to a shorter-term mortgage. This allows them to more quickly build up equity in their home and pay off their loan more quickly.


Some lenders include a prepayment penalty clause in the loan paperwork. While these clauses are not as prevalent now due to federal laws that went into effect in 2014, older mortgages are likely to include these fees. This means if the homeowner pays off their 30-year mortgage in less than 30 years, they will be assessed a fee.


Those who can now afford to pay more to their mortgage may find it helpful, then, to refi from a 30-year note to a 15-year note. In addition to the shorter term, this new loan will most likely not carry a prepayment, allowing the borrower to pay it off as quickly as they like.


  1. Homeowners Can Refinance to Consolidate Debt


Finally, it makes sense for a homeowner to consider refinancing if doing so puts them in an overall better position financially. Some homeowners borrow more than they need so they have money to consolidate debt or to tap equity for a project or major expense. However, while paying for these large expenses may seem like a good reason to refi, homeowners do need to be careful.


Often, they borrow too much and end up with a larger monthly payment. Despite their plans, they end up owing more in debt than they began with. While refinancing to consolidate debt can be a good way of paying down high-interest debt, borrowers do need to be careful that they come out ahead.


These are three situations where it makes sense to refi. There are many other reasons a homeowner might want to refinance, but to decide if it’s the right time, they always need to ask themselves if, in the long term, they are coming out ahead.