Refinancing a commercial mortgage means paying off an existing loan, and then replacing it with a new one. But why exactly do borrowers choose this option? More importantly, what benefits does refinancing offer? Property owners refinance for a variety of reasons including the opportunity to obtain a lower interest rate, as well as a chance to shorten the term of their mortgage. When it comes to refinancing your commercial mortgage, the lending experts at Hunt Mortgage Group have you covered. Here are 4 great reasons why property owners choose to refinance their mortgage.
1. Securing A Lower Interest Rate
One motivation for a property owner or homeowner to refinance involves securing a lower interest rate. This means that a borrower will receive a lower interest rate on the loan they’re currently are paying, thereby paying less money in the long run. Refinancing for this purpose allows property owners and homeowners to save money each month by lowering their monthly payment.
2. Shortening The Length of A Mortgage Term
Some property owners and homeowners choose to refinance with the intention to shorten their mortgage term. If you have a 30-year mortgage you may want to shorten the term of the mortgage to 15 years if you’re worried about a long commitment. While the monthly rate will rise slightly, borrowers can reduce the time it takes to pay back the loan. Since this shortened mortgage term would have a lower interest rate than the 30-year mortgage. For example, according to financial real estate experts, for that 30-year fixed-rate mortgage on a $ 100,000 home, refinancing from 9% to $ 5.5% cuts the term in half to 15 years. This would cause only a slight change in the monthly payment from $ 804.62 to $ 817.08.
3. Converting To a Fixed-Rate Mortgage
Property owners and homeowners also refinance to change the type of mortgage they have. A property owner or homeowner may desire to convert from an adjustable-rate mortgage to a fixed-rate mortgage, or vice versa. Adjustable rate mortgages may have a low monthly payment; but rates can fluctuate and increase. More often than not, a large majority of borrowers choose to refinance before the rates skyrocket.
Payments and interest rates can increase at any moment, which tends to worry property owners and homeowners. With fixed mortgage rates, a set rate exists for the duration of the loan. Choosing this type of mortgage at a time when interest rates are low can be a smart decision. If you’re struggling with hefty payments, you may want to choose an adjustable mortgage rate so that it is lower at the beginning of your payments.
4. Utilizing Equity
Though refinancing, a property or homeowner has the potential to pull a large sum of money out – a process known as equity. Some borrowers may need to use equity to develop in a booming real estate market. But, the money does not come at without cost. Borrowers will need to make payments on a monthly basis to pay back the equity line. Be cautious because only experienced borrowers should consider using equity to manage finances.
Is Refinancing Your Best Option?
Refinancing can be a smart financial move to reduce your mortgage payment. Many factors that can determine if refinancing is the best option for you. With over 40 years of lending experience, Hunt Mortgage Group can offer advice and strategize what would work best to get you a comfortable mortgage rate. Contact a professional at Hunt Mortgage Group today!